Betashares launches new bond ETF as Aussies flock to safer territory
Money is pouring into the bond market amid growing economic uncertainty.
Falling interest rates and global economic uncertainty have made bonds the new most popular investment in Australia.
BetaShares' Australian Government Bond ETF (ASX: AGVT), which launched Tuesday, marks the newest addition to the fixed-income market and underscores the latest trend taking Australia's ETF market by storm.
In 2018, bond ETFs comprised almost one-third of all new money into the ETF market, almost doubling funds under management, according to the latest annual ETF report from investment adviser Stockspot.
Government bonds are considered to be one of the safest investment options on the market, which means they typically do better during periods of global instability and falling interest rates.
And it seems investors are expecting that not-so-rosy picture to continue for some time to come. Fixed-income (bond) ETFs registered net flows of $1.16 billion in the first five months of the year, on par with international-equity ETFs, BetaShares' latest monthly ETF review showed.
The AGVT fund is the 23rd fixed-income ETF listed on the ASX and the 5th fixed-income-and-cash product released by BetaShares. It brings the company's cash and fixed income to a combined total of $2.35 billion in assets under management.
BetaShares CEO Alex Vynokur said there's been a jump in interest in the company's fixed-income range.
“The strong flows in the fixed-income category have also been assisted by the growth in investment options now available on the ASX, which we expect to continue to develop as the market matures and investors increase their portfolio allocations to bonds,” said Vynokur.
AGVT tracks and attempts to outdo the performance of what is called the Solactive Australian Government 7-12 Year AUD TR Index. That won't mean much to most people, but the index basically offers exposure to a portfolio of bonds issued by the Australian government.
AGVT compared to Australian bond indices
| Key metrics | AGVT’s Index | Bloomberg AusBond Government Index | Bloomberg AusBond Treasury Index |
|---|---|---|---|
| Average credit rating (1) | AAA | AAA | AAA |
| Mod. duration (yrs) | 7.8 | 6.1 | 6.6 |
| Yield (p.a.) | 1.49% | 1.25% | 1.19% |
| 10-year total return (p.a.) | 8.00% | 6.40% | 6.20% |
Source: Bloomberg, BetaShares, as at 5 July 2019. NOTE: Past performance is not indicative of future performance.
“This is our first product that offers specific exposure to government bonds, a category that enjoys the highest level of investor security within the Australian bond market," said Vynokur.
The AGVT ETF listed on Tuesday and is currently priced at $49.
Read our ETFs guide to find out how you can access bonds through ETFs and compare trading platforms.
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