Adviser demand propels XTB model portfolio expansion

Richard Murphy

Richard Murphy

The launch this month of two additional XTB (Exchange Traded Bond unit) model portfolios is set to provide financial advisers and their clients with further opportunities to incorporate exposure to individual corporate bonds.

The new model portfolios are available exclusively to advisers and were developed in response to growing adviser demand for multiple portfolios that make corporate bond exposure simple. The new portfolios build on the first two XTB model portfolios launched in July this year as market uptake of XTBs continues to grow.

The Concentrated High-Yield Model Portfolio follows the philosophy of the High Yield Model Portfolio launched last month, but it caters to investors with lower balances by providing a portfolio with a smaller number of XTBs, which lowers the portfolio cost.

The Cash Plus Model Portfolio is designed for investors looking to create a tradable alternative to cash or short-term TD products. It delivers a significant pick up on the yields of many 3-month TDs, but without the holding period or break fees. With yields in the high 2s, it offers 100bps plus improvement over at-call cash or CMA accounts, many of which offer around 1.5%.

The Cash Plus Model Portfolio also has monthly interest payments, plus daily liquidity on ASX to allow investors and savers to access their cash. The portfolio is based on senior floating-rate bank bonds, which have exhibited ultra-low price volatility between 0.2% and 0.3% p.a., over the long term. This gives the Cash Plus portfolio very reliable and attractive cash flow, along with capital stability. The solution will potentially appeal mostly to SMSFs or investors and savers in the pension phase.

Australian Corporate Bond Company (ACBC) co-founder and CEO Richard Murphy said the new XTB model portfolios had been launched in response to growing adviser appetite for an enhanced way of managing the direct-investment fixed income component of their business.

“In the current low interest rate environment, advisers are being challenged by their clients to find efficient ways of delivering yield and income, but without price volatility, especially for those in, or approaching, retirement.

“We will continue to provide advisers with access to a growing range of corporate bond solutions to meet these needs of their clients. With four model portfolios now available, advisers can choose one or a combination of models to suit their clients’ risk tolerance and financial objectives,” Mr Murphy said.

XTBs are a range of 39 ASX-traded investments that give investors direct exposure to returns from individual corporate bonds from 26 leading ASX listed companies such as BHP, Woolworths and Telstra. The model portfolios launched in July include the High Yield Model Portfolio and Maturity Ladder Model Portfolio.

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