Investors have been given exposure to a portfolio of listed hybrid securities issued by the ‘Big 4’ Australian banks through the launch of BetaShares’ new hybrid exchange traded fund (ETF).
BetaShares said its new Australian Major Bank Hybrids Index ETF (ASX: BHYB) aimed to provide an option for investors challenged for income in a low-rate environment.
It said hybrid securities offered attractive franked income returns for usually moderate levels of volatility and have historically exhibited relatively low correlation to equities. Hybrids can be expected to produce risk and return characteristics above those of traditional fixed-income securities like bonds, but below those of ordinary shares.
To be eligible for inclusion in the Australian Major Bank Hybrids index, a hybrid security must be a listed preference share having a market capitalisation of at least $100 million and be rated at least investment grade. The ETF has a management cost of 0.35% p.a.
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BetaShares Chief Executive Officer Alex Vynokur said record low interest rates presented a significant challenge for investors seeking income.
“Our new ETF offers attractive income, but only holds hybrids backed by our ‘Big 4’ banks, which are among the most profitable and prudentially sound banks in the world,” Mr Vynokur said.
BHYB offers investors who understand the features and risks of hybrids a convenient, cost-effective way to access this unique asset class.”
BetaShares said the Australian Major Bank Hybrids Index provides a passive complement to BetaShares’ popular Active Australian Hybrids Fund (managed fund) (ASX: HBRD), which recently crossed the $1 billion funds under management milestone and is now the largest non-equities Active ETF available on Australian exchanges.
“The growth of HBRD has demonstrated that there is strong demand for exchange traded funds which provide access to the hybrids market,” Mr Vynokur said.
“We have additionally heard from our investors that there is demand for a passive exposure to the hybrids market, which we are now proud to deliver with BHYB”, Mr Vynokur concluded.
BHYB is now available on the ASX.