What’s Up With The BetaShares Legg Mason Bond (BNDS) ETF?

The BetaShares Legg Mason Australian Bond Fund (ASX: BNDS) could be one way to achieve the many potential benefits of adding bond exposure to your portfolio.

About ETFs

Exchange-traded funds, or ETFs, are investment funds that are listed on a securities exchange and provide exposure to a range of shares or assets with a single purchase. ETFs can be ‘managed funds’ or ‘index funds’, or in other words, active or passive.

The Australian Finance Podcast episode below explains index funds, ETFs and managed funds in more detail:

What Is The BNDS Australian Bond Fund?

The BetaShares Legg Mason Australian Bond Fund is a collaboration between BetaShares and US fund manager Legg Mason.

The BNDS ETF has a market capitalisation of $104 million and is an actively managed fund that seeks to outperform the Bloomberg AusBond Composite Index over a rolling three-year period. The fund aims to achieve this by investing in a mix of corporate bonds, government bonds, and other fixed interest securities.

Currently, roughly 42% of the fund is allocated to corporate bonds, and around 20% is allocated to commonwealth government bonds and semi-government bonds respectively.

Bonds can be a good addition to an investment portfolio due to the regular income they provide (in this case, monthly). Further, bonds can be an effective way of diversifying a share portfolio as bond prices and share prices tend to move inversely. Typically, bonds are considered a defensive asset.

Keeping this in mind, we can look at the running yield of the BNDS ETF which is 3.25% per year. This figure is the expected income from investing now at the market price. Over the last six months, the fund has returned 7.48% with the help of two interest rate cuts.

Fees & Risks

The BNDS fund has a management fee of 0.42% per year, which seems relatively low for an actively managed fund. However, given the return is also on the lower side, this fee could have a considerable impact on returns.

Bonds also come with interest rate risk since prices are directly impacted by interest rate cuts or rises. There is also a risk of default, particularly on the corporate bonds. However, with an average credit rating of AA, default seems unlikely for most of the bonds in this portfolio.

What Now?

I’ll be looking at more bond ETFs in the coming weeks as I’m looking at possibly diversifying my portfolio with bonds. This fund seems like a reasonable option for diversification and regular income, even if the fees are somewhat high. However, if you’re only looking for diversification benefits, it’s possible that a passive fund with lower fees could provide a more compelling option.

For our number one ETF pick, grab a copy of the free report below.

Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here or enter your email address below to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just enter your email address below and we'll send you the report right away.

From 200+ ETFs in Australia, our top investment analyst has just identified his #1 ETF for 2021 and beyond.

Low fees? Check.

Long-term growth potential? Check.

Regular cash returns? Check!

This ETF makes investing in ETFs "Super-Easy".

Simply click here to access the full ETF report, ticker code, and step-by-step investment guide. Our expert's #1 ETF report is completely free.

No gimmicks, no payment, no credit card info. Just click the link below and enter your email address. We'll send you the report right away.

CLICK HERE TO GET THE REPORT

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

Keep reading:

General Financial Advice warning
The information on this website is general financial advice only. That means, the advice does not take into account your objectives, financial situation or needs. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. Please read our Terms & Conditions and Financial Services Guide before using this website.

© Rask Australia 2020

Join 20,000+ smart investors

Join the Rask Australia mailing and we’ll send you free investment reports, podcasts, expert insights, investing courses, ASX news and lots, lots more. All free. 

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian-owned.

feedback-icon

What can we do better? Please give us us some feedback :)

We care about your experience, please let us know if you have any suggestions to improve our site.