Amid strong interest in fixed income so far this year, the BetaShares Australian Bank Senior Floating Rate Bond ETF (QPON) has surpassed a milestone $1 billion in assets under management.
BetaShares confirmed the achievement in a statement on Tuesday, after QPON recorded $525 million of net inflows in the 12 months to 30 June, including $347 million since the start of 2023.
The ETF provider noted that investors had sought to take advantage of the relatively high level of capital stability of floating rate bonds in the current interest rate environment.
Locally, the Reserve Bank (RBA) has delivered 400 basis points of monetary tightening announced since May last year, with many economists forecasting that more hikes are in store.
“Our leading range of fixed income ETFs have enabled investors to build more robust portfolios by providing access to parts of the fixed income market that have traditionally been the domain of institutional investors,” said BetaShares chief executive officer Alex Vynokur
“As a result, our floating rate bond funds have assisted investors and their financial advisers to mitigate the impact of global moves to address rising inflation by increasing policy rates.”
QPON’s portfolio covers some of the largest and most liquid senior floating rate bonds issued by Australian banks. It includes an 80 per cent allocation to the big four – the Commonwealth Bank, NAB, Westpac, and ANZ – and a 20 per cent allocation to other local banks.
According to BetaShares, QPON aims to provide investors with an attractive monthly income as well as relative capital stability. Mr Vynokur suggested that QPON had helped investors reduce their reliance on fixed rate bonds within their portfolio.
“Over the past 18 months, investors in our QPON fund not only avoided the worst of the fixed rate bond sell-off but also benefited from increased income paid through monthly distributions,” he said.
“With inflation proving relatively sticky, QPON is expected to continue to resonate with investors, as the income associated with its variable coupon typically moves in line with changes in the RBA cash rate.”
Fixed income ETFs received $2.5 billion in net inflows during the first half of this year, according to the latest BetaShares Australian ETF Review, the most popular category ahead of Australian equities ($1.6 billion) and cash ($688 million).
A record $18.2 billion is now tracking bond ETFs after growth of 42 per cent per year over the past five years. Bond ETFs now account for 12 per cent of Australia’s $150 billion ETF market.
“We’ve found that while bonds and the broader fixed-income asset class had experienced some of their worst performance in decades during 2022, bonds are attracting significant inflows in 2023,” said Stockspot founder and CEO Chris Brycki.
“We’ve been researching the more than 250 ETFs on the ASX and Cboe Australia for 10 years now and this is the first time we’ve seen bond ETFs getting so much interest.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.