New report: Australians invested in corporate bonds could double in the next 12 months

 

• 16 per cent of High Net Worth Investors (HNWIs) are invested in corporate bonds
• Number of HNWIs invested in corporate bonds could nearly double in 12 months
• 70 per cent of HNWIs not invested in corporate bonds are missing out due to lack of awareness of the asset class

 
3 May, 2018: Momentum in the Australian corporate bond market could see the number of High Net Worth Investors (HNWIs) holding bonds almost double in the next 12 months, a Deloitte Access Economics Report has found.
 
The Corporate Bond Report 2018: Australia’s growing appetite for corporate bonds, commissioned by FIIG Securities, found that 16 per cent of Australian High Net Worth Individuals (HNWIs) are invested in direct corporate bonds, with 37 per cent of direct corporate bond holders expecting to re-invest and 15 per cent of non-investors planning on investing for the first time in the next year.
 
Deloitte Access Economics surveyed more than 700 HNWIs with over $2 million in investable assets for the study, finding that the ground swell of engagement in the corporate bond market was being driven by a number of factors for investors including good returns given risk profiles (72%), capital preservation (54%), and a reliable income stream (73%).
 
The report also found that 40 per cent of those surveyed cited concerns about future changes to Australia Government taxation and superannuation policies. The lower political risk posed by corporate bonds could therefore support future investment in this asset class.
 
FIIG Securities Managing Director, Jim Stening, said FIIG commissioned the Deloitte Access Economics report to shine a spotlight on how the corporate bond market performed and the potential it offered to Australia investors. 
 
“The report highlights that an increasing amount of investors are realising the opportunity that corporate bonds present. Providing strong returns, a reliable income and historically outperforming shares during economic downturns; investors are beginning to tap into corporate bonds as a vital part of a well-balanced, diversified portfolio.”
 
The report outlines that the average gross return of corporate bonds was 6.1% in the 10 years to 2016, outperforming ASX (4.3%) and global share markets (5.5%). However, in comparison to other OECD countries, Australian investor uptake of corporate bonds was playing catch up: private investors in Australia hold less than 1% of all corporate bonds on issue in Australia compared to almost 20% in the United States.
 
Of those HNWIs who did not own corporate bonds, 70 per cent said they didn’t have sufficient understanding of the asset class to invest. This group was more likely to have a higher percentage of their portfolio allocated to property and cash investments, reducing the diversification benefits achieved by their portfolio.
 
“While the size of Australia’s corporate bond market has grown rapidly during the past 10 years, it still remains significantly smaller than that of other developed economies and direct market participation by Australian investors is relatively low compared to other countries.
 
“However, the findings show that Australian investors are beginning to catch up with our global counterparts when it comes to realising the benefits of corporate bonds and a genuinely balanced portfolio,” Stening said. 
 
Deloitte Access Economics found that the outlook for corporate bond investment in Australia is positive. According to report author and Deloitte Access Economics Partner John O’Mahony, “Our research finds that the share of HNWIs with corporate bond investments is expected to grow from 16 per cent to 29 per cent in the next 12 months. Investors highlighted the low yield environment for cash investments as their number one concern, and an increasing awareness of corporate bonds as an alternative fixed income investment option will support growth in private investor demand.”
 
Mr Stening added, “Among those who are switched on to corporate bonds, we’re seeing a growing appetite for more with 86 per cent having a positive investment experience. This increasing market interest in corporate bonds indicates a tipping point in Australia’s understanding of diversification and fixed income, but there is a still a significant segment of the investor community that is playing catch up.”
 
FIIG Securities is working to educate the market on the important role that corporate bonds play for Australian investors.
 
To receive a full copy of the report, please email marketing@fiig.com.au.
   
For enquiries and further information contact:
Alexis Carroll or Kimberly Riddell
02 8014 5033
FIIG@decpr.com.au
 
About FIIG
FIIG Securities Limited, which is licensed by the Australian Securities & Investments Commission (ASIC), is Australia’s largest specialist fixed-income house.
 
FIIG has more than $10 billion in assets under advice in its short-term money market, bonds and custody business.  The company has Offices in Sydney, Melbourne, Brisbane Perth and Malta. For more information about FIIG Securities please visit www.fiig.com.au