BetaShares has announced the launch of a new ETF that gives investors access to long-dated sovereign bonds issues by some of the world's largest developed economies.
The BetaShares Global Government Bond 20+ Year ETF - Currency Hedged (GGOV) aims to track an index that provides exposure to a portfolio of long-maturity, income-producing bonds issued by governments of G7 nations, hedged into AUD.
BetaShares said global government bonds have historically provided significant diversification and defensive benefits to portfolios during periods of market decline.
The bonds which GGOV invests in are typically of very high credit quality, with 40% of the bonds in the portfolio rated AAA and an average portfolio credit rating of AA as at April 30 this year.
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The fund's index methodology selects only G7 government bonds with relatively long maturities.
BetaShares said to be eligible, bonds must have a remaining term to maturity of more than 20 years.
BetaShares chief executive Alex Vynokur said in previous share market downturns, government bonds historically have tended to rise in value
"We are excited to be able to give Australian investors the chance to invest in a diversified portfolio of high-quality global sovereign bonds," he said.
BetaShares said GGOV's focus on long-maturity bonds enhances the fund's diversification and defensive benefits.
"Given that yields on many short-maturity sovereign bonds are currently close to zero, it is primarily bonds with a longer term to maturity that are more sensitive to interest rate movements," BetaShares said.
"GGOV intends to pay quarterly income, and has management costs of just 0.22% p.a."
Vynokur said the new fund makes the process of investing in global government bonds simple and cost-effective.
"It offers a robust option for gaining exposure to an important portfolio building block for investors seeking regular income, as well as a high-quality tool to defend portfolios," Vynokur said.