Zenith upgrades Schroders’ High Yielding Credit strategies as investors seek alternatives to bank hybrids

Schroders Australia is pleased to announce that both the Schroder Australian High Yielding Credit Fund (Wholesale Class) and the Schroder Australian High Yielding Credit Fund – Active ETF (Cboe:HIGH) have received upgraded ratings to ‘highly recommended’ from Zenith as investors increasingly look beyond bank hybrids for income opportunities.

The ratings upgrade comes at a pivotal time for Australian income investors after the Australian Prudential Regulation Authority’s (APRA) decision to phase out Additional Tier 1 (AT1) bank hybrids, prompting many investors to reconsider how they generate reliable income from their portfolios.

In its latest reports, Zenith said its conviction in both Schroders strategies had strengthened, describing them as “highly attractive” options in the Australian corporate debt sector.

Further, the strategies benefit from Schroders’ well-defined top-down investment framework, complemented by rigorous bottom-up security selection, enabling the team to identify opportunities across investment-grade corporate credit while actively managing portfolio risk.

Zenith: “With a long-term track record of managing domestic credit portfolios, Zenith considers the Fund to be a highly attractive option in the corporate debt sector and our conviction has strengthened, highlighting Schroders’ well-defined top-down processes and proven ability to manage portfolios through different phases of the cycle.

“In Zenith’s opinion, the top-down framework effectively combines a range of macro inputs with the team’s qualitative insights on the idiosyncrasies of the Australian credit market.”

The ratings reflect Schroders’ long-term track record in domestic credit investing and ability to actively manage portfolios through different phases of the credit cycle.

Zenith also highlighted the strength of Schroders’ portfolio construction process and investment team, identifying Head of Credit Helen Mason’s ability to actively manage portfolios through different phases of the credit cycle as a key competitive advantage.

Mason said the upgraded ratings reflected the team’s consistent investment approach and came at an important time for Australian investors.

“We’re delighted that Zenith has strengthened its conviction in both our wholesale fund and Active ETF. The upgrade reflects the depth of our investment process, the strength of our credit research and our disciplined approach to navigating changing market conditions.

“From an investor perspective, the phase-out of bank hybrids is reshaping Australia’s income investing landscape. Investors who have traditionally relied on hybrids are now looking for high-quality alternatives that can continue to deliver attractive income while managing risk.

“We believe actively managed investment-grade credit is well placed to meet that need through diversified exposure across corporate issuers and active portfolio management,” she added.

The upgraded ratings apply to:

• Schroder Australian High Yielding Credit Fund (Wholesale Class) (APIR: SCH0778AU)
• Schroder Australian High Yielding Credit Fund – Active ETF (Cboe: HIGH)

Both strategies seek to outperform the RBA Cash Rate by 2.5 per cent to 3.0 per cent, per annum (before fees) over rolling three-year periods while providing regular monthly income through investment in predominantly Australian investment-grade corporate credit.