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Russell Investments Australian Semi-Government Bond ETF (RSM)

Fixed income in 2023: Is a renaissance coming?

About this Fund

Fund Detail

PDS https://informedinvestor.com.au/view/pds/100975-2022-03-24-02:42.pdf
FUND MANAGER Russell Investment Management
ASX Code RSM*
APIR
ASSET CLASS EXCHANGE TRADED FUNDS
INVESTMENT STYLE RGB invests in a portfolio of predominantly Australian semi-government fixed income securities.
INVESTMENT PROFILE The Fund seeks to match the performance of its Benchmark Index before fees and other costs.
CURRENCY MANAGEMENT Unhedged
INCEPTION DATE 08-03-2012
BENCHMARK DBIQ 0-5 year Australian Semi-Government Bond Index
FUND SIZE DBIQ 0-5 year Australian Semi-Government Bond Index
DISTRIBUTION FREQUENCY Quarterly
NO. OF HOLDINGS Around 10
FEES 0.26% p.a.
STRUCTURE

Benefits

Benefits

Benefits of investing in the Russell Investments Australian Bond ETFs

What are the benefits of ETFs in general?

  • Diversification: ETFs provide you with the ability to diversify your portfolio through holding a single security.
  • Liquidity and transparency: As a traded security, an ETF enables you to enter and exit your holding on the ASX. You can easily track performance and can even trade on the same day (subject to ASX rules).
  • Lower cost: Since ETFs are typically able to achieve lower operating costs, the management costs can be lower when compared to other forms of managed funds. However, brokerage or adviser fees may still apply when buying or selling an ETF.
  • Access: ETFs may also enable access to portfolios of underlying securities that are not readily accessible to non-institutional investors.

What are the benefits specific to the Fund?

  • Targeted exposure: The Funds will predominantly invest in portfolios of different types of Australian fixed income securities, which may not generally be easily accessible to retail and small institutional investors.
  • Flexible approach: The availability of security based exposure ETFs enables investors a greater level of flexibility to customise their fixed income exposures to their own needs, including the level at which they wish to incorporate credit and interest rate risk in their portfolio construction. The flexible approach of term to maturity ranges also enables investors to more accurately tailor their duration exposure.
  • Equal weighting of fixed income securities: There are advantages associated with an equally weighted approach compared to market-cap weighted fixed income indexes. While market-cap fixed income benchmarks may create a closer reflection of the performance of that particular sector, they may not necessarily result in the optimum portfolio for an investor. A market-cap weighted fixed income portfolio will have its largest exposure to an issuer with the largest issuance of debt, whereas an equally weighted fixed income benchmark holds eligible fixed income securities at equal weight on reconstitution. This arguably provides more diversified exposure and can assist in spreading default risk more evenly amongst the portfolio.
  • Tradable and liquid: The Indexes have been specifically designed to be implemented and traded in an ETF structure. Therefore, each Index methodology includes specific rules to ensure that only the most liquid and tradable fixed income securities are included, which assists in providing a more efficient implementation of the Index.

RISK LEVEL
INVESTOR SUITABILITY

Risks

Title
Detail

Key Features

About the Fund

The Russell Investments Australian Semi-Government Bond ETF (the 'Fund') seeks to track the performance of the DBIQ 0-5 year Australian Semi-Government Bond Index ('the Index'), which comprises predominantly Australian semi-government fixed income securities. The fund aims to provide exposure to the largest and most liquid Australian state government bonds as identified by certain eligibility criteria including minimum issuance size and term to maturity. The fund also aims to deliver diversified risk through equally weighting the securities on reconstitution to ensure that the exposure is not biased towards the largest borrowers.

About the Index

The DBIQ 0-5 year Australian Semi-Government Bond Index is a fixed income index provided by Deutsche Bank (Index Provider). It is designed to provide investors with diversified and investable exposure to Australian Semi-Government fixed income securities.

The DBIQ 0-5 year Australian Semi-Government Bond Index starts with a universe of Australian fixed income securities.

A number of filters are applied to the universe to ensure that the eligible fixed income securities are issued by Australian institutions, and have features of (including but not limited to) fixed rate, non-callable, fixed coupon paying terms.

The DBIQ 0-5 year Australian Semi-Government Bond Index then specifically identifies fixed income securities that are issued by approved State Government agencies as specified in the Index methodology, and that have a minimum issuance outstanding of over $1 billion based on face value to ensure sufficient liquidity.

The fixed income securities are then ranked by term to maturity (TTM), and a maximum of two fixed income securities per issuer are selected based on the TTM closest to approximately 5 years, with a minimum TTM rule of 1 year.

The fixed income securities are then equally weighted based on market value on the day of reconstitution. The DBIQ 0-5 year Australian Semi-Government Bond Index is reconstituted quarterly, with the above rules applied and equal weighting occurring on reconstitution. The weighting of the individual fixed income securities is likely to vary in between reconstitutions based on price movements.

Coupons received from the constituents are to be reinvested back into the relevant security or securities.

More details about the characteristics of the DBIQ 0-5 year Australian Semi-Government Bond Index are available at: http://index.db.com.

Mandate

How we invest your money

The Fund seeks to track the performance of the DBIQ 0-5 year Australian Semi- Government Bond Index by investing predominantly in Australian Semi-Government fixed income securities. The DBIQ 0-5 year Australian Semi- Government Bond Index filters the largest and most liquid State Government securities and weights them equally upon reconstitution. Derivatives may also be used to a limited extent to obtain or reduce exposure to such securities.

We will not significantly change the Fund's investment strategy as described in this PDS unless the change has been approved by a resolution of Unitholders passed by at least 75% of votes cast on the resolution.

Derivatives

A Fund may use bond and bond index futures contracts that are listed on the Sydney Futures Exchange to give cash holdings market exposure in order to achieve a desired investment position without buying or selling the underlying assets. Futures usage will generally be limited to a maximum of 5% of a particular Fund's value at any time. Derivatives will not be used speculatively or to leverage a Fund.