Alex Vynokur
Leading Australian fund manager, Betashares, has launched the Betashares Australian Major Bank Subordinated Debt ETF (ASX: BSUB) on the ASX.
The new fund provides intelligent exposure to a portfolio of high-quality Tier 2 floating rate subordinated bonds issued by the Big Four Australian banks. To be eligible for inclusion in BSUB, bonds must have amounts outstanding of at least $500 million and a remaining maximum term to maturity of 10 years. The Australian major banks remain the foundational pillars of our banking system, and Australian banks are generally considered some of the best capitalised major financial institutions in the world.
Generally, Tier 2 floating rate subordinated bonds offer attractive income potential, typically delivering returns above that of senior bank floating rate notes, along with a high degree of capital stability. At the same time, the income paid by these bonds varies in line with benchmark interest rates, offering protection against rising interest rates.
Betashares is the largest provider of cash and fixed income ETFs in Australia with $10.5 billion in funds under management in the asset class. Over the past 12 months, Betashares has received $2.5 billion in net flows to cash and fixed income ETFs from investors, the largest by some margin of Australian ETF issuers. The launch of BSUB expands Betashares’ range of cash and fixed income ETFs to a total of 19 investment solutions.
“We’re excited to launch BSUB as we continue to broaden the range of investment options available to Australian investors and their financial advisers. BSUB offers investors attractive monthly income, a high degree of capital stability, along with potential portfolio diversification benefits due to Tier 2 floating rate bonds historically exhibiting a low correlation to equities,” said Betashares CEO, Mr Alex Vynokur.
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