Single Bond ETFs can diversify a portfolio that includes shares, property and traditional bonds, potentially lowering overall risk and providing regular income. Adding Single Bond ETFs to your overall portfolio mix will help to stabilise capital while still providing strong returns. They can be suitable for both short-term and long-term investment goals.

A corporate bond is a debt security issued by a company (the “issuer”) to raise capital for several purposes. Companies may issue corporate bonds for expansion, to fund new projects, to pay off existing debts, or to provide regulatory capital. The buyer of a bond (or bondholder) is a lender to the bond issuer in exchange for the payment of a specific rate of interest in periodic payments over a defined period. At the end of the bond’s term (maturity), the bond issuer is obligated to repay the bondholder the principal amount of the bond and any residual interest owing. Traditional bonds are typically bought and held to maturity with fixed coupon payments.

Corporate bonds are usually issued with a higher rate of interest than government bonds because they are higher risk investments, typically offering investors 2.0-4.0% higher returns than Government bonds. Corporate bonds are mostly traded over-the-counter (‘OTC’) and not typically available through securities exchanges. Prices for corporate bonds can fluctuate based on various factors including changes in interest rates, the financial health of the issuer, and general market conditions which could herald movements in the official Reserve Bank cash rate.

Fixed rate bonds

Fixed rate bonds are a type of debt security that pays a fixed interest rate to bondholders for the life of the bond. The interest rate (aka coupon rate) is set at the time of issue and does not change throughout the life of the bond, regardless of any changes in market interest rates. This means that bondholders will receive a predictable stream of income from the bond, making it a popular choice for investors who value stability and certainty. As the coupon return does not change, the traded price of this type of bond may fluctuate during its life. When the bond reaches maturity, the principal amount is returned to the bondholder, and the bond is no longer in effect. Investors will receive the face value principal back at maturity, paid by the issuer.

Floating rate notes

Floating rate notes are a type of debt security where the interest rate is not fixed but rather fluctuates with market interest rates. The interest rate of a floating rate note is typically tied to a benchmark rate, such as the Bank Bill Swap Rate (BBSW), and resets quarterly to reflect changes in the benchmark rate. As a result, the interest payments to bondholders vary over the life of the bond. These bonds are popular among investors who wish to benefit in a rising interest rate environment, and as such provide a level of protection in higher inflationary periods.

*Coupon frequencies displayed are the standards in Australia for both fixed and floating rate bonds.

Single Bond ETFs are available in both fixed and floating.

You can find out more about Single Bond ETFs from your stockbroker, financial adviser, or you can contact Income Asset Management directly.

Single Bond ETFs are essentially a listed corporate bond-backed investment that gives investors exposure to interest payments (subject to fees) and capital preservation of a single corresponding corporate bond.

Single Bond ETFs offer returns that track the overall returns of an underlying over-the-counter corporate bond. Over-the-counter bond markets are generally harder to access for retail clients but with single bond ETFs, we are opening this market to everyday investors.

A variety of Single Bond ETFs will be made available through the Cboe Securities Exchange, meaning you will be able to construct your own portfolio from available Single Bond ETFs, based on the underlying bond exposures you want.

Everyday Australians can make an investment in Single Bond ETFs via stockbrokers, share trading apps or investing platforms by using the “ticker code” of each Single Bond ETF on offer.

Single Bond ETFs allows retail investors to access corporate bonds, which are only usually available to wholesale investors.

The underlying bonds are not on a listed exchange, whereas these are listed via the ETF, making them more accessible. You can also trade smaller parcels than the wholesale market, which has a minimum investment of $50k.

The performance will closely track the performance of the underlying bond, however they differ in that they’ll incur management fees and costs.

Everyday Australians can make an investment in Single Bond ETFs via stockbrokers, share trading apps or investing platforms by using the “ticker”.

Corporate bonds are only available in the wholesale market, so you must have a sophisticated investor certificate to invest. There is also a minimum investment amount/parcel size of $50k.

Single Bond ETFs open up the corporate bond market to retail investors.

Single Bond ETFs offer investors economic exposure to a single corresponding corporate bond which is different to traditional bond funds, which give you economic exposure to a pool of various bond assets chosen by the investment manager.

With Single Bond ETFs you get to choose the bonds you’d like to invest in, whereas with a bond fund the manager chooses. When multiple Single Bond ETFs are available, you’ll be able to create your own portfolio of listed bonds.

There’s greater transparency in being able to determine the income you’ll receive and the performance of the underlying bond should reflect the performance of the Single Bond ETF, less fees and costs.

Each Single Bond ETF we offer is backed by an investment grade, ASX-listed company, including some household names.

Single Bond ETFs are generally more liquid than traditional bonds because they can be bought and sold on exchanges. However, liquidity can vary depending on the specific Single Bond ETF and market conditions.

No, you own a unit in an Exchange Traded Fund. You have economic and a beneficial exposure to the underlying bonds through your ownership of the units in that class. Please refer to the IAM Listed Bond ETF – Product Disclosure Statement.

The benefits of investing in a Single Bond ETF are:
• Diversification – it allows you to diversify your portfolio across different bonds in smaller parcel sizes
• Performance – this will closely track the performance of the underlying bond.
• Liquidity – you’re able to buy and sell as required.
• Transparency – the buy and sell price, and fees, are disclosed
• Access – the underlying bonds are not on a listed exchange, these are listed via the ETF, making them more accessible as you don’t need to purchase individual bonds directly from issuers.

A Single Bond ETF will be subject to the same risks as the underlying corporate bond.
These risks include:
• Credit and information risk
• Liquidity and suspension risk
• Concentration risk
• Market risk

Refer to the relevant IAM Listed Bond ETF – Product Disclosure Statement and Target Market Determination for full details about risks.

If the issuer of the underlying bonds defaults, the Single Bond ETF’s value will decrease similar to any other fixed income asset or fund.

The issuer of the underlying bond will generally have an investment-grade rating. An investment grade is a rating that signifies a relatively low risk of default. In Australia, default statistics are lower than Global averages by nature of it being a largely investment grade market.

IAM will provided an independent recommendation on the fundamental view of the credit. The recommendation will be positive, neutral or negative based on the team’s internal credit research. IAM will consider, but not limited to:
• The financial analysis of the borrower;
• The industry the borrower operates in;
• The company’s business position;
• Macroeconomic considerations, such as economic growth and interest rates; and
• The capacity and ability of the borrower to repay.

Investors may also have recourse to the issuer’s assets depending on the specific terms and protections of the underlying bond which would be considered.

You will be paid a distribution that reflects the coupon, less fees and costs. The distribution will match the coupon frequency of the underlying bond.

This depends on the nature of the bond, whether it’s fixed or floating, and if you sell it before maturity.

Returns depend on factors such as interest rates, credit quality, and market conditions and length of holding the asset. Single Bond ETFs generally provide income through regular interest payments, and may have potential capital gains or losses. If you sell or redeem your investment in a Single Bond ETF before the maturity of the corresponding underlying bond, the face value may not be earned.

There are management fees and costs of 0.265% per annum on the value of your investment. You may incur a fee when trading through the Cboe Securities Exchange. Your adviser or broker may also charge a fee.

Further information is available in the IAM Listed Bond ETF – Product Disclosure Statement.

Single Bond ETF prices are determined by the market demand and the value of the underlying bond, adjusted for fees and charges.

The trustee will calculate a price daily for each class, which is used by the market maker to determine a bid and offer price as published on the exchange.

Single Bond ETFs are priced daily.

You can buy or sell Single Bond ETFs on CBOE Securities Exchange during market hours.

Single Bond ETF’s can be traded like shares through your stockbroker, advisor or investment platforms where the ETF have been added by the platform operator. Each Single Bond ETF will have its own ticker code which can be easily used for identification.

Everyday Australians can make an investment in Single Bond ETFs via stockbrokers, share trading apps or investing platforms by using the “ticker code” of each Single Bond ETF on offer.

Settlement times are the same as all CBOE Securities Exchange listed products. Settlement is T+2.

You will need a brokerage account to buy and sell Single Bond ETFs. There are minimum investment parcel sizes for these Single Bond ETFs which are detailed within the ETFs offer documents.

Via your broker or trading app or through the APEX listed registry online portal. Distribution statements and annual statements will be issued.

Single Bond ETFs are taxed as exchange traded funds. Interest income is typically taxed as ordinary income, and capital gains from selling Single Bond ETFs are subject to capital gains tax.

IAM is a full-service investment house, focused on income investments including deposits, bonds and loans. First class fixed income and bond broking expertise, modern trading technology and market leading research, enables investors to build well-diversified bond portfolios.

TAL is a fully owned subsidiary of IAM. It is the responsible entity of IAM listed bond ETFs.

ETB is a fully owned subsidiary of IAM. It is the bond manager of Single Bond ETFs.