XTBs to wrap up year on a high


By Kristen Crawford

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Australian Corporate Bond Company’s (ACBC) exchange-traded bonds (XTB) achieved their highest recorded take-up in November since the products were launched in May, according to group chief executive and co-founder Richard Murphy.

“Yesterday was our best day yet and the year is definitely not over in our opinion,” Murphy said on Tuesday.

ACBC co-founder and non-executive director Ian Martin said fixed income was a simple proposition that should be embraced by all investor portfolios.

“At ACBC we believe in transparency and we believe investors should get what they pay for,” Martin said.

“The excess return that you get on investing in a corporate bond over the equivalent government bond is called credit spread.

“Some managers add corporate credit risk to their portfolios and call this excess alpha. I have a problem with that.”

Prior to XTBs becoming available, it was difficult for investors to access that potential excess return, he said.

“To highlight this, let’s take the example of a bond fund that uses the composite index as its benchmark,” he said.

“To do this they’re giving themselves a tremendous head start.

“The index is 80 per cent SSA – sovereign, semi-national and agency – which is World Bank-type paper.”

The average credit spread of all bonds was about 30 basis points before fees, he said.

“So if you invest in the composite bond index, the full fees, you’re going to have an average credit spread of 30 basis points,” he said.

“The 27 fixed-rate XTBs have an average credit spread of 112 basis points after fees.

“So XTBs allow investors on the ASX to have transparent access to that excess return through credit exposure and that is what drives us on a daily basis.”

The group released three tranches of XTBs in November, bringing the total number of XTBs on offer to 33.

The latest tranche of four fixed-rate XTBs, released last month, expanded the range of bank bond exposures available to retail investors, with a senior bond each from Bank of Queensland and National Australia Bank added to the suite of XTBs.

Senior bonds from Coca-Cola Amatil and Sydney Airport were also added.

Murphy said the range of XTBs on offer now included offerings from the banking, mining, property, transport and infrastructure, entertainment, energy, manufacturing and telecommunications sectors.

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