Schroders launches income-based active ETF 

From

Mihkel Kase

Schroders has launched an active fixed income exchange traded fund (ETF) on Chi-X Australia (Exchange code: PAYS) with the aim of helping investors strengthen the defensive allocation within their portfolios by boosting income, while seeking to protect capital.

PAYS delivers exposure to the Schroder Absolute Return Income Fund, which has a track record of meeting investors’ needs for reliable monthly income. It is managed by Schroders’ Australian Fixed Income team, backed by a global network of specialists based in 12 locations around the world.

Lead portfolio manager, Mihkel Kase, said that with interest rates at all-time lows, investors need to look further afield to find income.

“PAYS aims to meet this need while at the same time providing peace of mind that there is a strong focus on managing risk, should markets fall.

“Many of the options that offer higher yield for investors – including hybrids and leveraged loans – also increase the risk of capital loss – potentially more than investors realise. PAYS can complement these types of investments by reducing overall portfolio risk, which is particularly important now, as we enter the late stage of the investment cycle.

“In addition, PAYS is designed to supplement investments such as term deposits, providing reliable monthly income, currently 3.4 per cent per annum (post-fees). It also gives investors the flexibility to access their money if they need to.”

Mr Kase added that taking an active management approach is key.

“In an environment where interest rates are heading towards zero around the world, it’s important to be ‘active’ to have the best opportunity of finding the ‘winners’ and avoiding the ‘losers’.”

Mr Kase has been managing the underlying fund in which PAYS invests, the Schroder Absolute Return Income Fund, since it was established in June 2002. It has delivered a total return of 3.78 per cent over 3 years (post-fees) and is currently paying a monthly income of 3.4 per cent per year (post-fees). The fund has management fees of 0.54 basis points and is easy to access via one trade on the Chi-X Fund market.

Mr Vic Jokovic, CEO of Chi-X Australia, says the launch of PAYS increases the number of active ETFs that are exclusively traded on the Chi-X Funds market.

“We launched Chi-X Funds to help support further access, competition and innovation in the Australian marketplace.  We are delighted to be partnering with a quality top-tier global manager like Schroders, and to offer PAYS as part of our growing suite of funds.

“PAYS adds to the total number of funds traded on Chi-X, which offers trading in all Australian ETFs.

“Almost 40 per cent of trading volumes in Australian ETFs already takes place on Chi-X and the establishment of Chi-X Funds will further strengthen our significant volumes” Mr Jokovic said.

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