The launch of fixed-income exchange-traded funds (ETF) in the Australian market will lead to self-managed superannuation funds (SMSF) reassessing their allocations to the asset class.
A strong uptake of fixed-income ETFs by SMSFs was expected, iShares director and head of intermediary sales Tom Keenan said.
“If you look at the shareholder registries of the equity ETFs, SMSFs are big holders of ETFs [because] it’s a way for the SMSF market to re-engage with a form of asset management,” Keenan said.
“We believe in time they will reassess or rethink their allocation to fixed income because that access has been so significantly enhanced.”
Part of the reason why allocations to the fixed-income market in Australia were so small was the issue of access, he said.
“So we can naturally expect that the SMSFs will adopt, in increasing numbers, exposures like this through time because it’s much easier for them to do so,” he said.
BlackRock Investment Management yesterday announced three iShares fixed-income ETFs had officially been brought to market.
The UBS Composite Bond, UBS Treasury and UBS Government Inflation ETFs can be accessed on the Australian Securities Exchange.
Investors’ desire for control over their portfolios would help spur demand for fixed-income ETFs, iShares managing director Mark Oliver said.
“Clients want to be able to know what they own. That’s really what’s driving ETF demand,” Oliver said.
He said the addition of fixed-interest ETFs would allow for broader portfolio allocation.
“You’ve got Australian shares, you’ve got international shares, you now have bonds. That’s the start of people being able to truly build an ETF portfolio,” he told InvestorDaily.
“For iShares, this is about the build-out of the next core building blocks for investors. There are a couple of areas which we cannot currently provide for investors and we’ll be looking to fill those gaps.
“If we look at how investors approach international markets, we have unhedged exposures in Australia.
“Investors have seen the effects of currency so perhaps, in the fullness of time, we can address that,” he said, referring to the impact of an appreciating Australian dollar on purchases of stocks listed offshore.
