Richard Murphy

The ASX quoted higher-yield corporate bond solution XTBs (Exchange Traded Bond units), has doubled funds under management (FUM) in the past six months, reaching $200 million.

The FUM milestone coincides with the product’s two-year anniversary. XTBs have attracted increasing demand from self-directed investors, financial advisers, and brokers since launching in 2015.

47 XTBs are currently available on ASX and on 27 leading platforms. A further expansion of the range is due in the coming weeks. XTBs offer all investors access to returns from individual corporate bonds on ASX and are approved for distribution by 158 Australian dealer groups.

A real alternative to Term Deposits

XTBs were launched due to growing demand for higher-yielding corporate bonds on ASX as an alternative to Term Deposits (TDs). They are a milestone in meeting this demand and are ASX’s only product with:

• A risk-return profile close to TDs
• The same predictability of income & capital payments as TDs
• Low capital volatility and
• Yields generally above TD rates – with some considerably higher than current Top 4 bank TD rates.

Industry support and collaboration driving growth

XTB has also unveiled a number of new solutions to make corporate bonds more accessible, including model portfolio SMAs for both financial advisers and investors.

XTB has experienced strong support from across the broader wealth management industry, collaborating with industry luminaries such as Macquarie’s Owners Advisory, Ord Minnett, Praemium and BondAdviser and entering into an education alliance with online broker Bell Direct to expand access to XTBs.

Richard Murphy, XTB co-founder and CEO, said, “Doubling FUM within six months is testament to the broadly-held vision across the industry that there’s an enduring need for access on ASX to corporate bonds for all investors.

“Before XTBs there was a gaping hole in ASX’s range of individual securities. There was nothing between low-risk Government Bonds and much more capital-volatile hybrids and equities. Corporate bonds are the missing link. They sit just above government bonds and TDs in risk terms, but well below more risky hybrids and equities.

“It’s no wonder so many investors have been sitting on the sidelines in TDs when there was nothing on ASX’s supermarket shelves that met their need for lower-risk, lower-volatility predictable investments, but with returns above TDs.

“The world of XTBs is growing fast on ASX because XTBs plug the gap and stack the once-empty shelves in the corporate bond section of the ASX Supermarket.”

Macquarie Group Chief Investment Officer John O’Connell said that XTBs had filled an important gap in the market.

“XTBs provide an innovative way for retail investors to gain exposure to the Australian corporate bond market. They are well worth consideration as an ASX-traded alternative to term deposits in a low interest rate market,” Mr O’Connell said.

The post XTBs break through $200 million milestone appeared first on AdviserVoice.

Richard Murphy

Reflecting the continued search for income in a low-yield environment by investors, in particular SMSFs, ‘XTBs’ have recently been added to OwnersAdvisory by Macquarie.

The OwnersAdvisory platform offers custom advice across all standard asset classes; cash, fixed income, equities, commodities and alternatives, based on an investor’s personal profile, objectives and risk appetite. The inclusion of XTBs on the digital wealth management platform expands the range of fixed income solutions that OwnersAdvisory advises on.

Founder of OwnersAdvisory and Macquarie Banking and Financial Services Group CIO John O’Connell said the two innovative solutions would complement each other, providing customised fixed income solutions to suit every portfolio.

“With Term Deposit rates tracking interest rates down to all-time lows and continued equity market volatility, we’re seeing a growing demand for higher-yielding fixed-income investments, particularly from those close to, or in retirement. Corporate bonds are worth consideration when investors are looking to rebalance their portfolios.”

“In particular, XTBs provide an innovative way for retail investors to gain exposure to the Australian corporate bond market. Often these bonds provide a better yield relative to their risk,” Mr. O’Connell said.

Each of the 48 XTBs on ASX provides access to the returns of an individual senior corporate bond, with a low minimum investment amount.

XTB co-founder and CEO Richard Murphy said access to corporate bond returns was important for OwnersAdvisory’s users to build a diversified investment portfolio across all asset classes. XTBs make that access easier for digital platforms such as OwnersAdvisory, because XTBs are on the digital grid by virtue of being on ASX.

“Bonds are a very important asset class because they reduce portfolio risk. But they need to be available on platforms and other digital technology hubs like ASX for them to make sense for many businesses like OwnersAdvisory and their clients.

Bond funds and ETFs are also on platforms. But funds are perpetual therefore investors lose the most critical economic feature of bonds – repayment of capital at maturity. This is a key driver of the capital stability and predictability of returns individual bonds provide. As bonds and XTBs mature, the outcome of your investment is known at the outset, which is great for retirees.

“We will be working closely with OwnersAdvisory to help further educate investors about the role of corporate bonds within a well-balanced and diversified portfolio,” Mr. Murphy said.

The post XTBs added to Macquarie digital wealth management platform OwnersAdvisory appeared first on AdviserVoice.

Richard Murphy

Two new tranches of 10 XTBs have been released on ASX last week, including the introduction of the first ever ‘green’ XTBs. The release brings the XTB suite to 49, as demand for the innovative new product continues to drive expansion.

The first green XTBs are over fixed rate green bonds from ANZ and NAB (YTMANZ & YTMNA1).  Green bonds are comparable to other senior bonds in their structure. Their ‘green’ label comes from the bond issuer committing to using the funds for purposes that meet the requirements of the Climate Bonds International Standards and Certification Scheme. This makes them of interest to environmentally focused, ethical investors.

Last week’s release includes five floating-rate XTBs and a further five fixed rate XTBs. It significantly expands the range of XTBs available over bank bonds including bonds from issuers such as ANZ, Macquarie Bank and Westpac for the first time.

The indicative yields of the fixed rate XTBs ranged from 2.26% to 2.54% and indicative trading margins of the floating rate XTBs from 0.67% to 0.92% over BBSW on 21 October.

Australian Corporate Bond Company (ACBC) co-founder and CEO Richard Murphy said the expanded XTB range reinforced the firm’s commitment to innovation and improving investor access to corporate bonds on ASX.

“The two green XTBs have been launched in response to growing interest among investor groups and professional managers looking for ways to make a positive contribution to the environment.”

XTBs are an ASX-traded product giving investors exposure to the returns from corporate bonds.  XTBs are available over a wide variety of  ASX100 companies such as BHP, NAB and Telstra. Each XTB has a face value of $100.

“XTBs provide a regular, reliable income stream and are defensive assets for today’s volatile and uncertain markets,” Mr Murphy said.

The post First green XTBs hit ASX in response to growing appetite for socially responsible investing appeared first on AdviserVoice.

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.

The post Adviser demand propels XTB model portfolio expansion appeared first on AdviserVoice.

Richard Murphy

The introduction of two new XTB (Exchange Traded Bond units) model portfolios is set to provide financial advisers and their clients with a simple way to incorporate exposure to individual corporate bonds.

Launched yesterday and available exclusively through advisers, the industry-first XTB-only model portfolios create a cost-effective, efficient way for advisers to manage the direct investment fixed income component of their business.

The High Yield Model Portfolio is quantitative-based with qualitative overlay and consists of at least eight XTBs. The Maturity Ladder Model Portfolio aims to provide return of capital from maturing XTBs on an annual basis and consists of at least five XTBs. Advisers can select one or a combination of both portfolios, to best suit their clients’ needs.

ACBC co-founder and CEO Richard Murphy said the new portfolios cater for the growing appetite for more defensive investments, particularly corporate bonds.

“Our XTB model portfolios have been developed in direct response to growing demand from advisers. Offering lower volatility than equities and hybrids and a higher return than cash and TD investments, our model portfolios make it easier for advisers to build corporate bond portfolios for clients,” Mr Murphy said.

“Extraordinary market conditions are driving a growing need for higher-yielding, low volatility products, which makes the launch of our model portfolios especially timely.

“These new model portfolios should resonate with clients looking for a transparent and stable fixed income portfolio that offers regular and predictable income streams.”

XTBs are an ASX-traded product that give investors direct exposure to returns from corporate bonds over leading ASX listed companies within the ASX100, such as BHP, NAB and Telstra. Since launching in May 2015, approximately $70 million worth of XTBs have now traded.

The new XTB model portfolios are currently available upon request directly via ACBC. To request further information, advisers can contact ACBC on 1800 995 993 or advisers@xtbs.com.au.

The post New XTB model portfolios simplify corporate bond exposure appeared first on AdviserVoice.

Richard Murphy

Record-low interest rates and increasing volatility are driving a growing search for capital stability and predictable income. This is paving the way for a marked shift towards more defensive investment portfolios, according to Australian Corporate Bond Company (ACBC).

Launching the firm’s new whitepaper, ‘Lower rates for longer: Implications for Australian fixed income’, ACBC CEO and co-founder Richard Murphy said extraordinary market conditions and product innovation had created a perfect storm for fixed income investments.

“Until relatively recently, Australian retail investors have not felt the need to invest in fixed income, or corporate bonds in particular, largely due to a lack of awareness, information and most importantly, opportunity.”

“However this is changing – recent innovations, such as XTBs (Exchange Traded Bond Units), fixed income ETFs and exchange-traded Australian Government Bonds, are making it much easier for retail investors to access fixed income, on ASX.”

According to Mr Murphy, fixed income should form a critical part of any properly balanced portfolio, providing capital stability and regular income.

“We are living in a low interest rate world, and in this context fixed income is arguably more important than ever. A 1% variation in income matters much more in an environment of near-deflation and low single-digit interest rates than in a world of, say, 2-3% inflation and 5% interest rates.”

Mr Murphy added that the current exceptional market environment was bringing a number of key questions to the fore, as advisers and retail investors look to build more defensive portfolios.

“These questions range from the suitability of managed solutions versus a direct approach, the impact of index tracking for fixed income investments and where hybrids should fit within a portfolio.”

Bringing the corporate bond market to retail investors

ACBC launched XTBs in May 2015 to fill the gaping hole on ASX in the breadth of fixed income investments available to individual investors. They bring greater accessibility to the corporate bond market – previously dominated by institutional investors.

Each XTB offers investors a simple, ASX tradable security that tracks the performance of a specific underlying bond (after fees and expenses) with no minimum investment. One year on, more than $50 million worth of XTBs have traded, reflecting the growing appetite for fixed income investments.

A total of 39 XTBs are now available on ASX and via 25 leading platforms. XTBs have also been approved for distribution by 140 Australian dealer groups.

“Our focus has always been to drive a greater understanding of the need for fixed income and the role corporate bonds can play in building better fixed income portfolios. We are continuing to grow the range of XTBs available and are committed to providing ongoing educational support to investors and advisers,” said Mr Murphy.

The post Innovation and unprecedented market conditions create ‘perfect storm’ for fixed income appeared first on AdviserVoice.

Richard Murphy

A recent survey by Australian Corporate Bond Company (ACBC) at the SMSF Association Conference in February has highlighted confusion over the classification of hybrids.

The survey showed almost half of respondents (47%) classified hybrids as fixed income or were unsure how to classify them.

Richard Murphy, co-founder and CEO of ACBC, said that while hybrids may have some fixed income features, they are not defensive when it comes to shielding portfolios against equity downturns. When equity prices fall, hybrids tend to behave more like equities.

This view is supported by John Likos, Head of Australian Credit Research at Morningstar who recently commented, “The increasingly issuer-friendly terms contained in hybrids suggest they shouldn’t be included in the defensive fixed income part of a portfolio.”

Nearly half of survey respondents (47%) considered regular income the number one priority for their clients for 2016. This was followed by accumulating wealth for retirement (28%). Capital stability was close behind, with almost a quarter of respondents (23%) identifying this as their client’s key priority.

“Given the current environment of low returns and market volatility, it’s no surprise to see investors focusing on regular income and capital stability. Senior bonds, unlike hybrids, have been able to consistently deliver income as well as capital stability in difficult markets” Mr Murphy said.

To help guide investors and advisers, ACBC has developed an educational factsheet on understanding hybrids and how they compare to corporate bonds.

The post Time for more defensive fixed income portfolios: ACBC appeared first on AdviserVoice.

Richard Murphy

ACBC launches new website to support education and investment in XTBs

The Australian Corporate Bond Company (ACBC) has launched a new website with enhanced features and tools to help advisers and investors calculate the potential outcomes of investing in XTBs (Exchange-Traded Bond units).

XTBs are an ASX-traded product that provide investors with access to corporate bond returns. Each XTB provides access to the returns of an individual underlying senior corporate bond, with no minimum investment amount.

The new website, which offers two portals tailored to advisers and investors, features a two-way yield & price calculator covering both fixed and floating rate bonds, plus a unique new cash flow tool enabling users to build a portfolio of up to 10 XTBs and visualise the timeline of coupon payments during the life of their investment.

Richard Murphy, CEO and co-founder of ACBC, said the new tools offer advisers and investors an easy and interactive way to learn more about XTBs and how corporate bond exposure can benefit their investment or superannuation portfolios.

“Since launching in May last year XTBs have attracted growing interest from both investors and advisers and we’ve been pleased to see strong traffic across our new investment tools.

“In just the first few weeks of the website going live, we’ve seen a broad range of XTBs added to portfolios via our tools and calculators, indicating that both the tools and the product are resonating well with the market,” he said.

“With more functionality and interactivity, our new website supports users through the educational journey. For investors, this involves selecting up to 10 XTBs that meet their requirements, seeing the cash flows that come from coupons & principal repayment month-to-month and year-to-year, and the overall returns. We have also made sure investors can then email the portfolio & performance charts directly from the website to their adviser or their own email account. For advisers, we’ve also developed a more advanced cash flow modelling tool that allows advisers to gain further detailed analysis to assist them in implementing their client portfolios.”

The new site also features multiple interactive elements, including scrolling tickers that can be clicked to view more detailed information on each XTB, plus explanatory videos.

With ongoing instability, volatility and uncertainty of global share markets over the last number of years and into 2016, Mr Murphy said advisers owe it to their clients’ best interests to fully consider their allocation of client portfolios to fixed income. And within the asset class, the circa 100 basis point Yield improvement corporate bond investments like XTBs can deliver over Term Deposits, without the excessive volatility associated with equities and hybrids.

“Corporate bonds offer an important way for retail investors to diversify their investment portfolios, bringing capital stability and greater certainty of income and outcome. Investment and Superannuation portfolios need greater diversification and more defensive assets to balance more risky and volatile investments. 2016 is the right time for investors and advisers to explore XTBs.”

The post New tools to help advisers and investors build corporate bond portfolios appeared first on AdviserVoice.

Richard Murphy

The Australian Corporate Bond Company (ACBC) has expanded its range of ASX-listed XTBs with the launch of six XTBs over Senior Floating Rate Notes (FRNs, or ‘Floaters’), offering retail investors access to a largely inaccessible part of the corporate bond market.

The six Floaters are the first XTBs to be launched over bank bonds. The bonds have been issued by AMP, BoQ (two XTBs), NAB (two XTBs), and Suncorp-Metway. The indicative Current Yields of these new XTBs ranged between 2.96% and 3.32% on 10 November 2015.

ACBC CEO and co-founder Richard Murphy said he was pleased to be broadening the range of corporate bond opportunities available to retail investors.

“We are excited about the potential opportunities these new XTBs can bring. XTB Floaters are high quality, capital stable instruments that share many of the attributes of cash investments and the benefits of trading on ASX,” he said.

The defining characteristic of Floaters is that the coupon moves up and down over time in line with a specified benchmark rate, such as BBSW (Bank Bill Swap Rate). While a rise in interest rates may be associated with a fall in the price of a fixed coupon bond, the holder of a Floater would benefit from the corresponding increase in the coupon, and so the price of Floaters are not as sensitive to interest rate changes. In all other respects, Floaters rank alongside other senior bonds and ahead of any subordinated or hybrid securities.

Among other features, Floaters pay coupons quarterly until maturity, which may appeal to investors looking for investments with cash flow management qualities. Floaters have low capital volatility and should trade close to the face value for the life of the bond, with the available income changing with market interest rate movements.

Floaters share many of the attributes of cash investments (such as capital stability), an asset class held by almost all investors in Australia. Floaters should typically deliver a higher return than ‘at-call’ cash accounts over time. In addition, Floaters have advantages relative to term deposits in that they can be sold at any time and can be seen as an ASX traded alternative.

The announcement follows the release of the second tranche of XTBs earlier this month, including higher yielding bonds such as Qantas, and brings the total XTB range to 33. A further tranche of fixed rate XTBs can be expected in the coming weeks.

XTBs offer investors simple ASX-traded fixed income securities. Each XTB provides access to the returns of an individual underlying senior corporate bond, with a low minimum investment amount. XTBs give investors access to an asset class on ASX previously only available in opaque, Over-The-Counter (OTC) wholesale markets.

The post New XTBs (Exchange Traded Bond Units) – ‘Floaters’ now available on ASX appeared first on AdviserVoice.

Richard Murphy

Reinforcing its commitment to improving investor access to corporate bonds on ASX, the Australian Corporate Bond Company (ACBC) has expanded the range of XTBs available, with the official release yesterday of a second tranche of six XTBs. This takes the range to 23 with a third and fourth tranche to be released in the coming weeks.

With the first tranche launched in May this year, XTBs offer investors simple ASX-traded fixed income securities. Each XTB provides access to the returns of an individual underlying senior corporate bond, with a low minimum investment amount. XTBs give investors access to an asset class on ASX previously only available in opaque, Over-The-Counter (OTC) wholesale markets.

Yesterday’s release of XTBs includes senior bond coverage of three Qantas bonds, and one each from APA Group, Caltex, and Mirvac. The indicative yields of these new XTBs ranged between 2.83% and 4.98% on 03 Nov 2015.

Greater options for capital stability

CEO and co-founder of ACBC, Richard Murphy, said the broadening of the XTB range should resonate with investors on the hunt for predictable income returns without sacrificing capital stability in a low yield environment.

“XTBs are an easy way for investors to protect their investment portfolio by accessing fixed income diversification. Exposure to the senior corporate bond market provides regular, predictable income as well as capital stability. Corporate bonds and XTBs, typically sit in the defensive part of investor portfolios. They are generally negatively correlated to equities and hybrids”, Mr. Murphy said, “so, as a general rule, corporate bonds or XTBs do not decline in capital value when equity markets fall, whereas shares and hybrids generally do.”

The yields on XTBs generally sit between the yields available on Term Deposits and the income available on hybrids. However, like their underlying senior bonds, XTB capital values are not as volatile as hybrid securities. XTBs and their underlying bonds are fixed income investments more suited to the defensive part of investor portfolios.

“In this second release of XTBs, some of the corporate bonds, such as Qantas, offer a higher yield than the first tranche, which broadens the risk profile of underlying bond issuers on offer and therefore the range of yields XTBs can deliver.”

Mr Murphy added that in addition to higher yields with capital stability, other features of XTBs, such as the transparency and liquidity of ASX and the ease of holdings & administration alongside share portfolios are appealing to investors and SMSFs.

“While it’s still early days for XTBs, we’ve been very encouraged by the positive feedback we’ve been getting from advisers and investors to date. Going forward we remain focused on continuing to educate investors on the benefits of gaining exposure to corporate bonds and rolling out new tranches of XTBs,” Mr Murphy said.

The post Next wave of XTBs (Exchange Traded Bond units) now live on ASX appeared first on AdviserVoice.