Surge in fixed income drives ETF record inflows
There are three Morningstar medal-rated ETFs that offer a low-cost way to gain access to high-quality Australian fixed-income.
Mentioned: iShares Core Composite Bond ETF (IAF), Vanguard Australian Fixed Interest ETF (VAF), Vanguard Australian Government Bond ETF (VGB)
The Australian ETF industry set yet another record, ending October with $57.2 billion in funds under management, according to the latest BetaShares Australian ETF Review.
The $1 billion increase in FUM for the month was due entirely to net inflows of $1.2 billion, with market falls detracting from growth.
“October’s growth caps off a remarkable 12 months for the industry, which added $16.4 billion in market cap, the largest 12-month increase on record,” said BetaShares chief executive Alex Vynokur.
Fixed income ETFs once again led the way in October, with $372 million in net inflows, $317 million of which went into Australian bond products. Following closely behind fixed income were International Equities, which saw $368 million in net inflows.
The biggest outflows occurred in the Australian financial sector, possibly due to profit-taking ahead of what was expected to be a difficult profit reporting week in early November. Outflows from European equities also continued, reflecting ongoing caution from investors in this region.
3 Morningstar rated Australian fixed income ETFs
The following three Australian fixed income ETFs carry Morningstar medals. They are a low-cost way to gain access to high-quality Australian fixed-income. Each ETF mentioned tracks the Bloomberg AusBond Govt Index 0+ Yr Index with an emphasis on keeping tracking error and transaction costs low.
The Bloomberg AusBond Composite 0+ Yr Index, a market-cap-weighted index designed to provide comprehensive exposure to the local bond market. It predominantly comprises government and semigovernment bonds, with supranationals and corporate bonds making up the rest. Each ETF has an attractive annual management fee of 0.20 per cent.
Investors may also consider active strategies. That includes the first active ETF in Australia, BetaShares Legg Mason Australian Bond, managed by Western Asset. BetaShares charges the same for the unlisted strategy, at 0.42 per cent, which Morningstar holds in high regard.
- iShares Core Composite Bond ETF (ASX: IAF) Morningstar Silver
- Vanguard Australian Fixed Interest ETF (ASX: VAF) Morningstar Silver
- Vanguard Australian Government Bond ETF (ASX: VGB) Morningstar Bronze
Note: returns are annualised
