Karen McLeod

XTB, an Australian-based provider of ASX-traded corporate bonds, is offering a new fixed income portfolio of environmental, social, and governance (ESG) approved securities to meet growing demand for ethical investments.

The XTB Emerald Fixed Income Portfolio is a managed portfolio of individual bond units (XTBs). The underlying bonds are issued by some of Australia’s top companies which have met The Emerald Club’s screening criteria. Bloomberg ESG Data is used to select companies with a strong track record of mitigating environmental, social, and governance risks relative to alternatives.

The portfolio is available from today on the HUB24 platform.

The portfolio provides investors a regular and predictable income stream, with an investment risk profile less than equities and hybrids, and a higher return than ‘cash-like’ investments.  It has an absolute return objective of 1% higher than the cash rate.

“The portfolio includes ASX-traded XTBs with underlying bonds from companies considered to have sound ESG policies,” says Richard Murphy, XTB co-founder and CEO.

“The portfolio is comprised of companies which are able to provide viable returns to investors while at the same time mitigating the environmental and social impacts of their business activity, operating in a manner respectful of society and managing within emerging ecological constraints. It helps advisers to match their client’s investments with their values.”

The companies in the XTB Emerald Fixed Income Portfolio have been selected by The Emerald Club, a responsible investment platform whose purpose is to make responsible investing more accessible and attractive to investors.

The Emerald Club runs a screen, by conducting an analysis of ESG factors based on a company’s annual disclosure of various metrics in its corporate social responsibility report. Screens include – total greenhouse gas emissions, water intensity per sales, and renewable energy use.

Karen McLeod, Principal Financial Adviser at Ethical Investment Advisers, said clients are increasingly seeking value-aligned investments and this portfolio directly caters to growing investor demand for ESG fixed income options.

“We are excited to see new developments in the ESG space, particularly in fixed income. Our clients want to know who they are investing with. Separately Managed Accounts (SMAs) of XTBs provide that next level of engagement and transparency that we have been looking for,” Ms McLeod said.

XTBs generated significant interest from investors in 2017, with funds under management up 117% to $265 million in 2017, from $122 million a year earlier1.

“XTBs are helping to fill the gap between low risk, low return term deposits and higher risk equities in the Australian market,” Mr Murphy said.

“Corporate bonds are the missing link on the ASX, providing retail investors with up to 50%2 greater returns than term deposits, with the added convenience of daily liquidity through ASX trading.

“More than doubling FUM in a year is testament to the fact that many investors have been seeking alternative defensive investments for their portfolios.”

There are now more than 50 XTBs available on the Australian market, which give investors exposure to specific, individual corporate bonds issued by blue-chip companies including AMP, BHP, Qantas, and Telstra.

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Richard Murphy

XTB, an Australian-based provider of Australian Stock Exchange-traded corporate bond investments, said today that its fixed-rate portfolios considerably outperformed both the credit index and the comparative bond ETF market in 2017.

The best-performing XTB portfolio, the Concentrated High Yield Portfolio, delivered a one-year return of 7.5%, versus a 5.1% return from the credit index. The top four comparative bond ETFs delivered annual performance of between 2.1% and 5.2%.

“XTBs allow investors to gain exposure to individual Australian corporate bonds issued by leading corporates on the ASX, just like buying shares in the same companies. Each XTB delivers the price stability and income from a specific underlying corporate bond with no minimum investment,” said XTB co-founder and CEO Richard Murphy.

XTBs generated significant interest from investors in 2017, with funds under management up 117% to $265 million in 2017, up from $122 million in 2016.

Mr Murphy said the strong performance of XTBs on the ASX, coupled with the low interest rate environment had delivered a solid 2017 for the firm.

“More than doubling FUM in a year is testament to the fact that many investors have been seeking alternative defensive investments for their portfolios,” he said.

Mr Murphy said XTBs are helping to fill the gap between low risk, low return term deposits and higher risk equities in the Australian market.

“Over the holiday period all the big four banks cut their base term deposit rates while raising introductory rates, so unless you are a constant shopper, you are likely to be getting a very low rate on term deposits,” he said.

“Corporate bonds are the missing link on the ASX, providing investors with up to 40% greater returns than term deposits, with the added convenience of daily liquidity through ASX trading.”

There are now more than 50 XTBs available on the Australian market, which give investors exposure to specific, individual corporate bonds issued by blue-chip companies including AMP, BHP, Qantas, and Telstra.

XTBs are also offered via most of Australia’s leading platforms and wraps, including AMP North, BT Wrap, HUB24, Macquarie, and Praemium.

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Richard Murphy

XTB, an Australian-based provider of Australian Stock Exchange-traded corporate bond investments, said yesterday that its fixed-rate portfolios considerably outperformed both the Composite Bond Index and the Credit Index in the past 12 months.

As a result, XTB Portfolios also markedly outperformed a range of popular investment products that track these indices – including Exchange Traded Funds (ETFs), ETPs and managed funds.

The XTB Concentrated High Yield Portfolio had a yield to maturity of 3.31%¹ on 9 October 2017.

“In comparison, term deposit rates are at record lows of 1.45% to 2.8%² – which is all an investor is given for locking your funds up in a term deposit for 5 years,” said Mr Murphy.

“And unlike term deposits, XTBs have the added benefit that they can be sold on the ASX throughout their life, or held to maturity for investors to receive their face value.”

APRA’s [September] household deposit figures show bank held deposits were at a record $858 billion. “Australian investors have resorted to the familiarity of term deposits.”

XTB has also started two separately managed accounts on Praemium’s platforms and Macquarie’s Investment Wrap. They have also made XTBs available on AMP North Super and Allocated Pension Platform. A Responsible Investing SMA is also expected to be live later this year.

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Richard Murphy

XTB, an Australian-based provider of Australian Stock Exchange-traded corporate bond units, said today it planned to expand its range of XTBs and also start a Responsible Investing separately managed account (SMA).

“Discussions with ASX to launch the new PDS for the expanded range are underway,” said XTB co-founder and Chief Executive Officer Richard Murphy. “The continued broadening of our product range reinforces XTB’s commitment to driving innovation in the fixed income market.

“The expansion of the range is likely to include XTBs with higher yields. This will broaden the choices of XTBs available to retail investors and advisers that provide more than 40% uplift on current Term Deposit rates.”

Extending the XTB Maturity Ladder

Mr Murphy said the new XTBs would allow Australian investors to develop a laddered portfolio of fixed-rate bonds, where maturities occur annually.  Laddering allows investors to manage their portfolios in an uncertain interest rate environment and take advantage of any future rate increases.

“The new XTBs will allow investors to strategically extend their bond ladder out to 2025,” said Mr Murphy.

“The approach of reinvesting the rate rise-impervious capital each year as a bond in the portfolio matures is becoming a popular approach we’re seeing from investors.  It’s a strategy that works well when interest rates rise.”

Responsible investing

Ian Martin, XTB’s co-founder and Chief Investment Officer, said XTB expects to offer a Responsible Investing SMA before the end of the year, following strong investor interest for products that deliver anticipated returns as well as meet ethical requirements.

“The demand for ethical investments has increased substantially over recent years,” said Mr Martin. “Our upcoming Responsible Investing product will deliver what investors are looking for within the increasingly popular SMA structure.”

XTB currently provides investors with the ability to gain exposure to individual Australian corporate bonds issued by leading corporates on the ASX, just like buying shares in the same companies.

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The announcement follows a period of strong growth for XTB, which saw it double its funds under management in the past six months, reaching $200m.

In his new role, Mr Martin will work closely with dealer groups, platforms, asset consultants and research houses, with a focus on delivering customised fixed income solutions.

Mr Martin is also an Executive Director and co-founder of the Australian Corporate Bond Company (ACBC), which launched XTBs to market in 2015.

Mr Martin has over 30 years’ experience in fixed income markets globally. His previous roles include Head of Rates, Australia and New Zealand for Deutsche Bank and Head of Trading Fixed Income for General Re Financial Products. He was a member of the Australian Financial Markets Association (AFMA) Market Governance Committee, a board member of Yieldbroker and a member of Deutsche Bank’s Global Rates Executive Committee.

Commenting on the appointment, Richard Murphy, XTB co-founder and CEO said the new role reflected the ongoing evolution of the business and growing demand for customised fixed income solutions.

“Ian’s appointment to CIO is a pivotal milestone for the business. He has deep expertise in fixed income markets, home and abroad, and a proven track record of developing fixed income solutions in the institutional market. This will enable us to respond to the growing market demand for tailored fixed income model portfolios and Separately Managed Account (SMA) solutions,” Mr Murphy said.

“Incorporating both qualitative and quantitative techniques, Ian has already successfully designed a range of fixed income model portfolios. His portfolios seek to optimise defined-outcomes for end-clients and are resonating strongly across the market.”

Mr Martin said he was “passionate about fixed income innovation and ensuring all Australian investors have access to the right fixed income opportunities.”

“Advisers and their clients continue to recognise the importance of fixed income in a well-balanced portfolio and I am looking forward to continuing to innovate the way in which they can access this important asset class.”

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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.

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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.

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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.

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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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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.

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