VanEck has announced its newest ETF, the VanEck Australian Fixed Rate Subordinated Debt ETF (FUSB), which is a sister fund of the VanEck Australian Subordinated Debt ETF (SUBD).
FSUB offers investors a transparent, liquid portfolio of investment grade credit quality subordinated fixed rate bonds issued by leading banks and financial institutions.
Launching on 12 December, FSUB taps into the same regulatory capital framework as SUBD but allows investors to diversify their exposure with fixed-rate opportunities.
“The Australian subordinated debt market has grown to over $70 billion, with nearly half of new issuance now fixed-rate,” Arian Neiron, CEO and Managing Director of VanEck Asia Pacific, said
“APRA’s mandated total loss absorbing capacity (TLAC) requirements for banks and other authorised deposit-taking institutions are driving continued Tier 2 issuance (~$15 billion per year), and the imminent phase-out of hybrid securities has accelerated the structural shift towards subordinated debt.
“Financial institutions have shifted Tier 2 capital issuance to both floating and fixed rate to accommodate increased investor appetite for defined income and duration exposures. The launch of FSUB gives investors a complete subordinated debt solution.
“With the Australian yield curve steepening recently and the 10-year bond yield at a 12-month high, we think FSUB is well-positioned, offering investors the opportunity to access a fixed rate bonds portfolio that is currently yielding around 5.7 percent.”
SUBD now has more than $3 billion in total assets and has attracted more than $1 billion net flows this year.
