BetaShares Launches ETF Tracking Solactive Australian Investment Grade Bond Select DH Index
In a slower economic environment with expectations of market volatility, investors might look for a quality portfolio that offers attractive income with reduced interest rate risk. Those may turn to investment grade corporate bonds, which are quality bonds that receive high rates from credit rating agencies. Within this framework, Solactive is pleased to announce that the Australian ETF provider BetaShares launched the BetaShares Interest Rate Hedged Australian Investment Grade Corporate Bond ETF, tracking the Solactive Australian Investment Grade Bond Select DH Index. The ETF was listed on the Australian stock exchange (ASX), with the ticker HCRD AU and ISIN AU0000247777.
The Solactive Australian Investment Grade Bond Select DH Index (SOLASIGH) tracks the performance of the Solactive Australian Investment Grade Corporate Bond Select Index (SOLAUSIG) while hedging its duration. The SOLAUSIG index provides exposure to AUD denominated non-government investment-grade bonds with a term to maturity between 5.25 and 10.25 years and includes up to 50 bonds selected based on option-adjusted spreads.
The duration hedge is performed by holding a rolling position of the ASX Treasury Bond Futures contracts. Given that movements in government bond yields typically are the largest contributor to the volatility of fixed rate corporate bonds, this hedging strategy aims to reduce volatility and capital variability of the affiliated bond portfolio.
Timo Pfeiffer, Chief Markets Officer at Solactive, comments: “This launch demonstrates our expertise not only in the equity space but also in the fixed income realm. For investors trying to diversify their portfolio in current market situations, we, together with BetaShares, developed an index that serves as a suitable tool in times of uncertainty. We are happy to continue our engagement with one of the major Australian ETF providers and expand our footprint in the APAC region.”
Alex Vynokur, CEO at BetaShares, says that the BetaShares Interest Rate Hedged Australian Investment Grade Corporate Bond ETF (ASX: HCRD) uses an intelligent indexing approach, by selecting the bonds in its portfolio based on expected returns rather than debt, which aims to avoid shortcomings of traditional debt weighted indices. “Australian corporate bonds are regarded as a core building block of a well-diversified portfolio. HCRD offers investors exposure to this core asset class in a way that reduces interest rate risk – an important consideration in an environment where inflation and interest rates are front of mind for investors and their advisers.”
Vynokur concluded: “Our versatile range of fixed income investment solutions allows investors to easily add defensive assets to their portfolios, tailored to their needs. We’re proud to offer another market-first ETF and to continue to contribute to the development of the Australian ETF industry.”