Industry Updates

Aussie investors warming to corporate bond ETFs: VanEck

David Tuckwell

A corporate bond ETF (PLUS) has become one of VanEck Australia's most popular products this month after netting A$115m in new assets, signaling that Australian investors may be slowly but surely warming to corporate bond ETFs.

"Australian investors are finally recognising the valuable role bonds can play in a portfolio, including providing attractive income and defence against capital loss," said Arian Neiron, the managing director of VanEck Australia.

One reason that corporate bond ETFs may be growing only now in late 2017, Mr Neiron speculated, is that investors are realising the doors they open.

The Australian corporate bond market has been gated historically, typically allowing only institutions to trade. Households wishing to participate had to work through unit trusts. New innovations, such as ETFs are starting to change that.

"Traditionally, corporate bonds have not been easy to access and the market has been far from transparent," Mr Neiron said.

Another reason, Mr Neiron suggested, was that active managers underperformance is gaining investors' attention.

According to the often-cited SPIVA Australia Scorecard, over the three-year period ending June 30, 2017, 96% of Australian bond funds underperformed their benchmark. Over the 12-months to June 30, 66% underperformed.

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