The Fund aims to track the performance of an index that provides exposure to a portfolio of high-quality bonds issued by Australian federal and state governments, and with a component also issued by supranationals and sovereign agencies.

The Fund’s strategy is to invest primarily in a portfolio of relatively ‘long duration’ Australian government bonds. 

Benefits of investing in the BetaShares Australian Bank Senior Floating Rate Bond ETF

• Regular attractive income - income paid to unitholders monthly, and expected to exceed income paid on cash and short-dated term deposits. Income should be expected to rise should interest rates rise and vice versa

• Stability - historically Australian bank senior floating rate notes have had a high level of capital stability, and limited capital variability during market declines

• Diversification - floating rate bonds have historically exhibited low correlation to equities as well as defensive characteristics during market declines

• Low cost - management costs of only 0.22% p.a.

• Ranking - underlying portfolio comprises senior bonds from Australian banks, which rank above shareholders in the event of issuer default

• Access - simple way to access a diversified portfolio of Australian bank senior floating rate bonds, which are inaccessible to most investors directly

• Transparent - portfolio holdings, value of Fund's assets, yield information and net asset value per unit available daily on our website

• Liquidity - available to trade on the ASX like any share, capital not locked up unlike term deposits

The product is likely to be appropriate for a consumer seeking capital preservation and regular income by providing exposure to a portfolio of high-quality bonds issued primarily by Australian federal and state governments, to be used as a core allocation, or small allocation, to fixed income within a portfolio where the consumer has a medium to long investment timeframe (3+ years), medium risk/return profile and needs daily access to capital.

About the Fund

• Aims to provide attractive and regular income distributions, combined with a high level of capital stability, expected to exceed income paid on cash and short-dated term deposits

• Assets are invested in a portfolio of senior floating rate bonds issued by Australian banks

• Eligible bonds must have amounts outstanding of at least $500 million and a term to maturity of between 1 to 5 years

• At least 80% of total portfolio weight allocated to bonds issued by the following eligible banks: ANZ Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac (equally weighted)

• Up to 20% of total portfolio weight allocated to bonds issued by the following eligible banks: AMP Bank, Bank of Queensland, Bendigo & Adelaide Bank, Macquarie Bank, Members Equity Bank and Suncorp-Metway

Investment objective

The Fund aims to track the performance of an index (before fees and expenses) that provides exposure to a portfolio of some of the largest and most liquid senior floating rate bonds issued by Australian banks.

What are Floating Rate Bonds?

A floating rate bond (also known as a "floating rate note or "FRN) is a debt security that pays a regular coupon (interest) that varies over time. The interest rate received by QPON on each floating rate bond is determined by:

• a variable benchmark rate, being the 3 month bank bill swap rate ("BBSW1); and

• a set margin above this benchmark rate that is usually determined when the bond is issued

Typically, the benchmark rate and the RBA Cash Rate have been highly correlated2. If the benchmark rate rises, the bond's interest payment will be higher, and if the benchmark rate falls, the bond's interest payment will be lower. Apart from changes to benchmark rates, an investor's return from QPON will also be affected by changes in the market price for the bonds it holds. Historically, changes in market prices of floating rate bonds have been relatively limited, and the capital stability has been high. Importantly, senior floating rate bonds, such as those held by QPON, rank above shareholders in the event of a default of the issuer.

How to use this ETF in your portfolio

The Fund can be used to implement a variety of investment strategies. For example:

1. A core component of a fixed income allocation providing attractive income, high level of capital stability and diversification benefits to investment portfolios
2. A complement to a core cash/term deposit allocation providing a regular income stream without the requirement to lock up capital
3. A complement or substitute to fixed rate bond investments for investors concerned about the impact on capital values if interest rates rise

How we invest your money

In seeking to achieve the investment objective, the Responsible Entity will employ a passive management approach designed to track the performance of the Index, before fees and expenses.

The Fund will generally seek to invest in the securities that comprise the Index in proportion to the weightings of the securities in the Index. This is known as a "full replication strategy. As far as practicable, the timing and nature of any changes to the composition of the Fund's investments will generally correspond with the timing and nature of changes to the Index.

The holdings of the Fund will not always exactly replicate the Index. The Fund may not hold all of the securities comprising the Index, may hold securities in weightings which differ from the Index, and may invest in securities that have been or are expected to be included in the Index. Also, the Fund may hold other securities that do not form part of the Index where this may help to achieve the Fund's investment objective.

Investors will be able to regularly compare the performance of the Fund against the performance of the Index via the BetaShares website at www.betashares.com.au.

The Fund may hold exchange-traded derivatives contracts from time to time (e.g. bond futures contracts). Derivatives will only be used in limited circumstances and will not be used to leverage the Fund.

Cash balances (which may include ASX-quoted cash trusts, including those managed by the Responsible Entity) may be held in the Fund from time to time.

The Index provides exposure to some of the largest and most liquid floating rate debt securities issued by Australian banks.

For more information on the workings and constitution of the Index, please see Section 2 of the product PDS.