ETF Securities launches new fixed income investment options
Leading ETF provider ETF Securities has given investors more options for investing in the fixed income market, with the launch of a US Treasury Bond fund and a USD high-yield corporate bond fund.
The new funds are ETFS US Treasury Bond (Currency Hedged) ETF (ASX Code: USTB) and ETFS USD High Yield Bond (Currency Hedged) ETF (ASX Code: USHY).
USTB is the first pure play exposure to US Treasuries available to Australian retail investors.
ETF Securities Head of Product Evan Metcalf said, “Fixed income securities play an important role in investment portfolios. Their returns generally have a low correlation to equity returns, which provides portfolio diversification.
“And over time, they have low volatility. This means they provide yield with relatively low risk. Investors often compare the yield on government bonds to the higher yield on dividends from equities. What they ignore is that to capture that dividend yield they must invest in an asset class with double-digit annual volatility.”
He added, “These investment options are perfect for investors like retirees or SMSFs who are seeking peace of mind, and low risk asset classes.”
Kanish Chugh, Head of Distribution ETF Securities added, “We will continue to offer innovative and timely products to the market and this launch marks the start of our new growth strategy, especially in light of Mirae Asset and Global X ETFs acquisition of our business.
“We are excited to work with Global X ETFs, and to dip into their vast research capabilities and experience. As a leading provider of ETFs we will continue to offer solutions for investors to build portfolios across the spectrum, whether it’s defensive, growth, income or alternatives,” said Chugh.
ETFS US Treasury Bond (Currency Hedged) ETF (ASX Code: USTB) tracks the iBoxx $ Treasuries Total Return Index, hedged into Australian dollars. The index is market capitalisation weighted and tracks the performance of bonds issued by the US government.
USTB gains its exposure to the index by investing in DWS Group’s Xtrackers II US Treasuries UCITS ETF. DWS is a leading global fund manager with €850 billion of assets under management.
The market for US government debt is the deepest and most liquid of any type of financial instrument, with more than US$23 trillion of outstanding Treasuries.
Despite the scale of this market, Australian retail investors have had no access to a pure play investment in US Treasuries until now.
ETFS USD High Yield Bond (Currency Hedged) ETF (ASX Code: USHY) tracks the Solactive USD High Yield Corporates Total Market Index, hedged into Australia dollars.
USHY gains its exposure to the Index by investing in DWS Group’s Xtrackers USD High Yield Corporate Bond ETF.
High yield bonds are tradeable debt securities issued by companies with sub-investment grade credit ratings. Investors who are prepared to accept higher risk can earn higher income than investors in investment grade bonds.
To qualify for inclusion in the Solactive Index, bonds must be issued by companies based in developed market countries with at least US$1 billion outstanding face value.
Metcalf said, “Fixed income markets have had mixed results over the past year but long-term the asset has proved its value as a core holding, providing investors with yield at relatively low risk.”
