Aussie ETF provider BetaShares has announced the launch of Australia’s first active ETF that invests in hybrids.
The BetaShares Active Australian Hybrids Fund (managed fund) (ASX: HBRD) is designed to help investors access a diversified portfolio of hybrids while seeking to minimise potential downside risk associated with owning hybrids directly.
Commenting on the launch, BetaShares Managing Director, Alex Vynokur, says: “HBRD is an innovative solution for investors. As an asset class, hybrids offer investors attractive tax-efficient income, and generally higher levels of capital stability and lower levels of volatility compared to Australian shares.”
“But while Australian investors have for many years been attracted to hybrids for these attributes, they are complex instruments and require vigilant oversight and risk management. We are bringing to the market a solution that provides investors with exposure to a portfolio of hybrids while also actively managing risk.”
The active strategy of HBRD gives investors instant access to a high-quality portfolio of hybrids, in order to provide more diversification to many investors who may otherwise own only a handful of hybrids directly.
In addition, the firm writes that the fund’s strategy has been specifically designed to manage the risks associated with hybrids during particular market conditions. If, and when the hybrids market is assessed to be overvalued, or to present a heightened risk of capital loss, the Fund can allocate more of its portfolio to lower risk securities, or even move entirely into cash.
“Hybrids are attractive but complex securities. Our discussions with investors prior to launching the Fund indicated that many would appreciate having this complexity managed for them by an expert manager,” says Vynokur.
“We believe that liquidity of investments is very important for investors to consider. Existing investors in direct hybrid securities are encouraged to compare the liquidity of their holdings with the liquidity of HBRD on the ASX.”
The Fund will pay monthly distributions and investors will be entitled to franking credits that the Fund’s investment portfolio generates. Domestically, the hybrids market is worth approximately AUD60 billion, with around AUD50 billion worth of hybrids listed on the ASX. A large majority of these were purchased by retail investors and SMSFs looking for the higher rates of income on offer. For SMSF investors and their advisers who have bought, or would like to buy, hybrids, HBRD is a unique solution.
“Innovation is a key part of the BetaShares mission and the launch of HBRD demonstrates our ongoing commitment to developing innovative investment solutions for Australians”, says Vynokur.
The Fund is managed by Coolabah Capital Institutional Investments, an independent Australian manager of credit securities, with deep expertise in valuing and investing in hybrids.
The Fund will be the 41st exchange traded fund launched by BetaShares since 2010.