Soon, hybrid investors will have an alternative to direct investment in ASX-listed hybrids. BetaShares plans to launch an exchange-traded fund (ETF) which will invest in a diversified portfolio of hybrid securities. As such the fund will provide a level of diversification which may elude individual investors who buy individual hybrid securities.
The new ETF will be actively managed by Coolabah Capital Investments and it will comprise hybrid securities, bonds and cash or any combination of these assets. Distributions may include imputation credits and they will be paid monthly.
It will be an actively-managed ETF and thus the management expense ratio (MER) will be higher than a standard index ETF. Management fees will be charged at 45bps per annum and there will also be a performance fee equal to 15% of any return achieved over an as-yet unspecified benchmark.
The new hybrid ETF will be the latest of several new ETFs offered in the cash and bond segment in 2017. In the last few months, bond ETF providers have focused on ETFs which comprise floating rate assets such as the VanEck Vectors Australian Floating Rate ETF (ASX code: FLOT) and the BetaShares Australian Bank Senior Floating Rate Bond ETF (ASX code: QPON). The reasons for this are obvious. Firstly, there were no floating rate bond ETFs listed in Australia and secondly, demand for floating rate alternatives has been keen.
The new ETF will trade under the ASX code “HBRD” but details at this stage are scarce. A full listing of existing cash and bond ETFs can be found in our ETF table here.