Thoughts on the VanEck Australian Subordinated Debt ETF (ASX: SUBD) for income
Hi, Thanks as always for your valuable insights. I note you haven’t covered the SUBD ETF In a while. Any thoughts on it as a consistent income generator? Thanks Michael
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Answer
Hi Michael,
The VanEck Australian Subordinated Debt ETF (SUBD) has paid a yield of 5.31% (unfranked) over the last 12-months with distributions paid monthly. A solid return considering it’s a yield-focused, lower-volatility income product that sits between cash and equity risk. The “subordinated” part means bondholders rank behind senior creditors in a wind-up scenario, which is why the yield is higher than a standard bank bond ETF – For members comfortable with that trade-off, we believe it’s a solid income investment.
Over the last 3-years the ETF has delivered a 6.44% pa return, slightly behind its benchmark, the iBoxx AUD Investment Grade Subordinated Debt Mid Price Index, but we like this major $3.7bn ETF whose 0.29% management fee is reasonable for the access to a portfolio of investment grade subordinated floating rate bonds issued by leading banks and financial institutions.
Important to note this produce invests in floating rate bonds, meaning changes to interest rate expectations will have little bearing on price, as it would with a fund holding fixed rate bonds.
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VanEck Australian Subordinated Debt ETF (SUBD)
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VanEck Australian Subordinated Debt ETF (SUBD)
