BetaShares has listed a high interest cash exchange traded fund (ETF) on the Australian Securities Exchange (ASX). Employing a very simple and secure structure, the ETF will hold Australian dollars in bank deposit accounts with one or more major banks in Australia.
The launch of the product represents the first in a range of cash and fixed income ETFs expected to be launched on the ASX in the coming weeks.
The BetaShares Australian High Interest Cash ETF will trade under the ASX Code “AAA” and aims to generate a return that exceeds the 30 day Bank Bill Swap Rate (before fees and expenses) with the income distributions paid monthly. Based on the current interest rates from its bank deposit accounts, AAA expects to generate investment returns of approximately 5.20% p.a before fees.
Drew Corbett (pictured), Head of Investment Strategy at BetaShares said that as markets around the world continue to experience volatility, investors are increasingly shifting their focus from capital growth to the income potential provided by cash and fixed income investments.
“With the introduction of this product, investors can obtain the benefits of interest returns that are competitive with ‘at call’ bank accounts combined with the simplicity and convenience of an instrument that is traded and settled like a share,” Corbett says.
Because it trades like any share on the ASX, the BetaShares Australian High Interest Cash ETF can be bought or sold at any time, without the need for bank account opening or paperwork.
“This is another example of BetaShares expanding the suite of investment solutions available for Australian investors. Due to the multiple uses of cash in a balanced portfolio, we expect this product to appeal to a wide range of investors,” says Corbett.
Before the high interest cash ETF, the two main options available for cash exposures were term deposits or an ‘at call’ bank account. According to RateCity, as at 31 January 2012, the current average one year term deposit rate was 5.15% per annum and the average high interest savings account rate was 4.39%. The gap between the two rates demonstrates the trade off between high returns and accessibility of funds before the launch of AAA.
“The returns of the ETF are likely to be competitive with term deposits yet provide the flexibility and access of an ‘at call’ account. This will be important for investors who may not be aware of the break fees that are payable if a term deposit is terminated early,” corbett says. “We believe the stability of cash holds great appeal in the current environment. The introduction of cash and fixed income ETFs represents a significant milestone in the development of the ETF market in Australia, and we think the defensive qualities of these investments will find broad appeal across a range of Australian investors.”
