BetaShares, a manager of Australian exchange-traded products, has been awarded a ‘Recommended(Index)’ rating from Lonsec for its Australian Bank Senior Floating Rate Bond ETF.
Launched earlier this month, QPON is the first ETF in Australia to offer exposure to a diversified portfolio of some of the largest and most liquid senior floating rate bonds issued by Australian banks.
The Fund invests at least 80 per cent of its assets in floating rate bonds issued by the big four Australian banks, and up to 20 per cent in bonds issued by the large ‘regional’ banks, including Macquarie Bank. These bonds are amongst the highest quality corporate bonds issued in Australia.
In its report, Lonsec noted the strengths of QPON including its monthly distributions which provide regular income to investors, transparency, efficiency and simplicity. In addition, Lonsec noted the ETF provides little or no key person risk, low default risk and competitive fees.
Lonsec looks at a fund manager’s investment process, people and resources, and liquidity, fees, performance and the risk associated with the fund as part of its review process.
BetaShares Managing Director, Alex Vynokur, said the launch of QPON provided an important tool to help advisers and SMSF investors mitigate the risk of rising interest rates. “With the US raising interest rates three times in the past six months and the Australian cash rate at historic lows, QPON gives investors access to an ETF that can be expected to deliver an increased total return, rather than decreased, during rising interest rate periods.
“The rating highlights the benefits QPON provides to Australian investors and their advisers seeking attractive income paid monthly, along with the diversification benefits and relative capital stability of floating rate bonds.
“Australian bank senior floating rate bonds have a number of benefits for investors, having historically provided attractive income levels compared to cash and term deposit products. In addition, they have shown low correlation to equities and higher liquidity in comparison to term deposits.
“The Index that QPON aims to track is currently yielding 2.87 per cent p.a. (before fees) – and these income returns have historically tended to be consistently above cash and short-term bank deposits.
“QPON also stands out as it provides access to a strategy that has previously been the domain of more sophisticated investors, due to high minimums in institutional bond markets and administrative burdens,” Vynokur says.
