The explosion of the active ETF market in recent months has resulted in an unprecedented level of choice for retail investors when it comes to fixed income securities, according to a leading global fund manager.
Schroders fixed income portfolio manager Mihkel Kase told Investor Daily that the maturation of the ETF market, and the rise of actively managed ETFs had given investors easier access to the fixed income market, which typically had not been as affordable or well known to retail investors as the equity market.
“It used to be that accessing markets, particularly fixed income markets, was very difficult. You’d go buy a penny dreadful mining stock but you couldn’t buy a five year BHP bond and clip the ticket,” Mr Kase said.
“Now it's probably the reverse, investors are really spoiled for choice. They can go out and buy the individual betas of the portfolio, but the challenge is how you blend those.
“Our view is it’s no longer an access issue for the investor, it’s a portfolio construction challenge, so what assets do I hold, how do I hold them, how do I hedge the exposures and how do I make sure I have enough liquidity as well.”
Mr Kase said the group had decided to offer its absolute return income strategy as an ETF as it would allow income focused investors to access a diversified portfolio of income securities that provided more defensive exposure to other popular income alternatives such as hybrids or high yield equities.
“One of the reasons why we bought our new product to the ETF space is we had an existing absolute return income solution which we thought was very critical in terms of trying to deliver income in a defensive manner, and we basically introduced the ETF as another access point,” he said.
“What we really want to do is provide investors and clients with the opportunity to access the listed space, because we understand that some clients, whether it be the annoyance over filling out forms, or it may be better in terms of the way they transact with their broker, we can provide a solution to them that can help solve the defensive income portion of their portfolio.”
While choice in the income space had greatly expanded when it came to listed products, Mr Kase said advisers and investors should be wary of what ‘income’ meant when looking at product options.