ASX-listed investment firm Income Asset Management (ASX: IAM) is filling a gap in the fixed income market with the launch of two Single Bond ETFs and has flagged there are more to come in 2025.
The two Single Bond ETFs launched by IAM offer economic exposure to the interest returns and capital preservation of high-quality bank subordinated debt from Westpac and Commonwealth Bank.
Australian corporate bonds are traditionally only available only to wholesale investors. However, according to Income Asset Management’s Director, Danielle Press, the new products will be accessible to a wider investor audience on the listed markets.
“There’s been an inherent gap in the market for Single Bond ETFs for some time and this launch addresses the demand for such an innovative investment product.
“With Single Bond ETFs we are catering to the growing appetite from Australian investors for fixed income products that have lower volatility compared with equities and a greater level of income than cash and term deposits.
“With the hybrid market to be phased out, this is prime opportunity for investors to still access predictable income with minimal risk of capital loss,” she said.
Ms Press said in assessing the domestic market, the banking sector presents solid opportunities, and each Tier 2 subordinated bond offers the end-investor different characteristics to suit their needs.
“The Westpac bond for example has a long issue date, maturing in 2038 and has a fixed to floating rate, while the Commonwealth Bank bond is a floating rate bond,” she said.
A Single Bond ETF offers investors access to a single underlying asset – without direct ownership - and provides exposure to interest payments and capital preservation. The investment offers returns that track the overall returns of an underlying over-the-counter corporate bond.
“We wanted to create an investment structure where everyday investors can access listed bonds in smaller parcels.
“Early indications suggest the product will attract strong demand from investors who have been denied access to direct bonds in the past,” she said.
The Single Bond ETFs will be listed on Cboe Australia. The ETFs will allow investors to construct their own portfolios based on the underlying bond exposures of interest.
Investment in the newly-launched ETFs can be made through stockbrokers, share trading apps or investing platforms by using the ticker code of the respective ETF and will be registerable on an investor’s CHESS HIN (Holder Identification Number).
