Exchange traded Aust Govt Bonds or something else

Hi Geoff,

There is a fair bit of water to run under the bridge before Hybrids go for retail investors, it’s a draft proposal at this stage. We think there is a reasonable chance that the asset class remains in some form with some tweaks to bail in triggers, which is essentially what APRA is concerned about –  hard to reconcile in any case, but that is the lay of the land currently.

Exchange traded government bonds are an option, but yields are significantly lower. For Wholesale Portfolios I (James) manage (via Shaw), we have been increasing our exposures to fixed rate corporate bonds targeting major banks and insurers. 5 years are paying around 6%, which we think is attractive, and we’re targeting fixed rate exposures to lock in higher interest rates now. We use Income Asset Management (IAM) which is a wholesale only platform, though FIIG do offer retail alternatives, just the fees are higher when they break a bond down into smaller parcels.

If Hybrids do ultimately go, like anything in the financial world, voids are filled with alternative options. For now, we hold hybrids and are adding some fixed rate corporate bond exposure. We are thinking more about managers such as Realm for Residential Mortgage-Backed Securities (RMBS) and while we’ve been mildly cautious on Private Credit (and probably wrong to be so), that is also an option, targeting higher quality managers like Metrics & Manning.