The Fund is an absolute return fund which is focused on emerging resources companies, and targets double digit returns over a 3-5 year investment cycle. (For Wholesale Investors Only)
The Fund will invest in a diversified portfolio of liquid, investment grade fixed and floating rate green, sustainable and social corporate bonds (For Wholesale Investors Only)
An absolute return fixed income fund that aims to deliver stable and consistent returns over time irrespective of share and bond market movements.
The Fund aims to achieve positive returns in rising and falling markets as well as above the Fund Benchmark by identifying opportunities that offer attractive risk-adjusted returns.
The Fund invests in capital securities issued by major Australian Banks, and Australian Bonds, providing clients with attractive and regular income distributions whilst providing low capital volatility. (Wholesale investors only)
Invictus Partners is an enterprise software and licensing advisory firm that operates in the global Software Asset Management services market. (For Wholesale Investors Only)
The Fund provides a reliable income stream by investing in high quality fixed income securities.
An actively managed portfolio that provides access to global high grade securities with geographical exposure primarily to developed G7 defined countries.
The Fund’s purpose is to invest in green, sustainable, and social bonds with the primary aim of targeting investments that contribute to lowering carbon emissions.
The Fund invests in a diversified portfolio of liquid, investment grade fixed and floating rate AUD corporate bonds (For Wholesale Investors Only)
An active portfolio comprising Australian Government, semi-Government and supranational bonds that are AAA or AA rated securities issued in Australian dollars.
The Fund has an absolute return focus and aims to provide clients with a regular income stream by investing in a diversified portfolio of primarily, investment grade, Australasian fixed income credit assets.
The Fund provides Investors with the opportunity to invest in the FHIM approved investment strategies (for Wholesale Investors only)
A diversified Australian fixed interest fund designed to align with specific personal and social values, without compromising on long-term returns.
Fixed income investments are financial instruments which provide predictable and stable returns over set periods, primarily in the form of interest payments—also known as coupon payments. These investments include government bonds, corporate bonds, fixed income funds and ETFs, and other debt instruments. Investors generally invest in fixed income opportunities to generate predictable passive income, diversify their portfolios, provide stability during market downturns, and reduce their risk exposure. According to NAB, ‘on a rising risk scale, bonds sit above cash but generally below other main asset classes, including equities and property.’
The main features of fixed income investments are regular income through periodic interest or coupon payments, higher returns than term deposits, lower volatility compared to equities, the prospect of safeguarding investors’ principal, secondary market liquidity, and diversification benefits which lower overall portfolio risk. The more conservative investors are, the more they generally value these benefits—and the higher their fixed income allocation tends to be.
Here’s a breakdown of the types of fixed income investment options available to Australian investors.
Government bonds are issued by the Australian and State governments to fund government spending.
Government bonds can be fixed or floating rate. Fixed rate bonds pay a pre-determined distribution which doesn’t change during the life of the bond. In contrast, floating rate bonds pay distributions which are linked to a variable benchmark, usually the bank bill swap rate (BBSW).
Government bonds are considered low-risk investments due to the prospect of generating predictable, steady returns backed by a government guarantee during the duration of the bonds. They are a popular choice for retirees seeking capital preservation and predictable income.
New government bond issues are available in the primary market run by the Australian Office of Financial Management (AOFM). According to AOFM, there were $952 billion Australian Government bonds on issue as at March 7th, 2025. As shown below, the value of Australian government bonds on issue has grown strongly in recent decades.
Subsequent to issuance, government bonds can often be traded on secondary markets like the ASX, or over the counter (OTC) through a fixed income broker like FIIG.
Corporate bonds are issued by corporations to fund their expansion plans, pay bills, make capital improvements, make acquisitions, and for other business needs. They generally offer higher yields than government bonds with varying levels of risk reflecting the issuer’s credit quality. They can be fixed or floating rate.
New corporate bond issues are available in the primary market which may be accessed via direct investment with the company or through a broker like FIIG.
Subsequently, corporate bonds can often be traded on secondary markets like the ASX, or OTC through a broker like FIIG. According to Betashares, secondary corporate bond prices are mainly determined by ‘evolving perceptions of an issuer’s creditworthiness and central bank interest rates.’
The Australian corporate bond market has grown in recent years—as shown below.
When buying a corporate bond, it’s important for investors to understand where a bond sits within a company’s capital structure, also known as the capital preservation ladder. This ladder ranges from senior secured debt, which is repaid first in the event of liquidation, all the way down to subordinated debt, which is at the end of the line of bond owners.
So the lowest risk corporate bonds are senior secured debt, followed by senior unsecured debt and subordinated debt. It’s also important for investors to understand that expected returns tend to correlate with a bond’s risk profile.
For example, a conservative investor seeking a higher return than is available in term deposits but without the higher risks of subordinated debt, may choose to invest in senior secured corporate debt to achieve their goals.
Treasury Notes (T-Notes) are short-term debt securities issued by the Australian Government with maturities ranging from a few weeks to a year. They provide investors with a highly liquid, low-risk option for capital preservation and income generation. According to AOFM, there were $41.5 billion of T-notes on issue as at March 7th, 2025.
T-Notes are generally considered almost risk-free as they are backed by a government guarantee. They tend to be popular with conservative investors or businesses who have a low risk appetite.
For example, a business in need of a safe, short-term investment to invest their excess cash flow may purchase T-Notes to earn a guaranteed return while maintaining liquidity.
Mortgage-Backed Securities (MBS) are fixed income securities backed by a pool of home loans. These securities are issued by financial institutions and provide investors with exposure to the Australian property market while generating fixed interest income.
Some MBS have government backing, while others carry higher levels of credit and prepayment risk. MBS generally offer higher returns than government bonds due to these risk factors.
According to the RBA, the Residential MBS (RMBS) market has maintained a stable share of the housing credit market over the past decade after a period of weakness after the Global Financial Crisis—as shown below.
For example, a sophisticated investor looking for higher fixed income yields than those generated by government bonds may choose to invest in government-backed MBS.
Fixed income funds are pooled investment vehicles that allow investors to gain exposure to a diversified portfolio of fixed income instruments managed by professionals with specialist expertise. These funds aim to outperform their benchmarks through active portfolio management.
Fixed income ETFs are exchange-traded funds that provide investors with exposure to a diversified portfolio of bonds that reflect the constituents of an underlying index or benchmark. These passive funds aim to perform in line with their benchmark.
The benefits of investing in fixed income funds and ETFs are ease of access and diversification. In the case of managed funds, access to specialist expertise is an important advantage, while in the case of ETFs, low management fees are a key benefit.
For example, a high net worth investor wanting low cost, diversified fixed income exposure may invest in a fixed income ETF such as BetaShares Australian Composite Bond ETF. Another investor aiming for outperformance versus a benchmark may be more aligned to invest in a fixed income fund such as Perpetual Active Fixed Interest Fund.
Term deposits are fixed term, fixed interest products provided by financial institutions. Term deposit rates are generally higher for longer lock-up periods.
Term deposits are regarded as similarly low risk as government bonds. Through the Financial Claims Scheme, the Federal Government guarantees deposits up to $250,000 per account holder per authorized deposit-taking institution (ADI). As a result, term deposits are popular with risk averse investors who prefer guaranteed returns.
For example, a retiree aiming for predictable, low risk income may invest in a term deposit such as Defence Bank Term Deposit.
Most investors allocate a portfolio of their portfolios to fixed income for the following three reasons.
Fixed income investments, and bonds in particular, generally have a low, or sometimes negative, correlation with stocks—as shown below.
As a result, the inclusion of bonds in a portfolio tends to reduce risk and volatility, leading to smoother long term returns. Bonds also offer the prospect of capital preservation since the principal is due to be repaid at the end of the term. This translates into a lower risk of capital loss compared with equities.
Fixed income investments provide investors with regular, predictable interest or coupon payments. This is a great advantage for investors who value passive income.
Bonds are also useful for investors who need to plan for steady cash flows due to expected cash outflows in the future. Many businesses invest in bonds for this reason.
Fixed income investments also serve as a hedge against market downturns. When equities are underperforming, fixed income markets can benefit from asset inflows as investors adjust their portfolios to become more defensive.
According to Suze Orman: ‘Every portfolio benefits from bonds; they provide a cushion when the stock market hits a rough patch.’
As with all investments, there are also risks involved when investing in fixed income.
Here’s a balanced view of the most significant risks faced by fixed income investors.
Bonds are particularly exposed to interest rate risk as there’s an inverse relationship between bond prices and interest rates—as shown below.
As a result, owning fixed rate bonds during periods of flat or falling interest rates tends to be more lucrative than owning them during periods of rising rates. To mitigate against the risk of owning bonds during a rate rising cycle, fixed income investors with this expectation may prefer to investing in floating rate bonds. Their yields adjust in line with official cash rates so they offer protection against falling capital values in the secondary market.
For example, during a rate rising cycle, an investor may be invested in a floating rate bond which pays the bank bill swap rate (BBSW) plus three per cent. The BBSW is a short-term interest rate linked to the strongest prime banks, so it closely follows the RBA’s official cash rate. In the event the RBA were to raise its cash rate by 25 basis points, this investor will benefit from a 25 basis point yield increase, which is likely to help protect the bond’s value in the secondary market.
Another mitigation strategy against higher rates is to invest in shorter duration (time to maturity) bonds, which tend to be less sensitive to rate changes.
Credit risk is the risk that a bond issuer defaults on one or more bond payments prior to the bond’s maturity. This risk is generally lower on government bonds than for corporate bonds.
Credit ratings are issued by agencies such as Standard & Poor’s and Moody’s, and can help investors gauge credit risk. Credit ratings range from AAA for the best quality issuers with the lowest risk down to D for the issuers who are already in default—as shown below.
Changes in credit ratings often impact a bond’s value in the secondary market. For example, a credit rating downgrade from BBB to BB may lead to a decrease in a bond’s value.
Inflation risk is the risk that inflation erodes the purchasing value of a bond’s future cash flows. This is a noteworthy risk for most bonds because coupon payments are not generally adjusted for inflation.
Bond investors aiming to mitigate this risk may consider inflation-linked bonds. These securities and their interest payments are indexed to inflation so they provide protection against inflation risk. They are mainly issued by sovereign governments.
For example, an inflation-linked bond’s value and coupon generally increases each year in line with inflation—as shown below.
Liquidity risk occurs when a fixed income security cannot be easily sold without significantly affecting its price. This risk tends to be most prevalent during times of market stress or low demand.
According to the RBA, liquidity risk impacts bond pricing: ‘bonds that investors think will be difficult to sell to other investors in the market will have a higher yield. Government bond markets are often the most liquid in a country and only face significant liquidity risks in times of financial distress.’
Government bonds are indeed highly liquid. In contrast, some corporate bonds and MBS have limited buyers, making them harder to sell. Bonds with longer maturities or issued by smaller companies tend to have particularly low liquidity.
For example, an investor holding high-yield corporate bonds during a market downturn may struggle to sell them at a fair market price and within a reasonable timeframe. This situation may lead to capital losses as and when then the investor secures a buyer.
Fixed income investments can be accessed through multiple channels, depending on an investor’s preferences, experience, and capital.
Below are the primary ways to invest in Australian fixed income opportunities.
Investors can purchase government and corporate bonds directly through:
For example, a self-directed investor wanting to buy government bonds on the secondary market may choose to buy exchange-traded Australian Commonwealth Government Bonds on the ASX.
Fixed income ETFs allow investors to gain exposure to a diversified portfolio of bonds while benefiting from low costs, liquidity, and passive management.
Common fixed income ETFs trading on the ASX include:
For example, a passive investor wanting low cost, diversified exposure to Australian bonds may choose to invest in BetaShares Australian Composite Bond ETF.
Managed fixed income funds are ideal for investors who prefer professional management, active bond selection strategies, and the potential to outperform their benchmarks. These funds provide diversified exposure to different types of bonds such as institutional grade bonds which aren’t generally accessible to retail investors.
Managed fixed income funds benefit from active management as fund managers actively adjust their funds’ exposure based on market conditions. This can help mitigate against risk and improve long-term performance.
For example, a high-net-worth investor seeking diversified fixed income exposure with the potential to outperform the market might invest in a managed fixed income fund such as Mutual High Yield Fund or Arculus Fixed Income Fund.
Robo-advisers are digital platforms which provide an automated, algorithm-driven approach to investing in fixed income and other asset classes. They are suitable for investors who prefer hands-off, passive investing strategies which are customized to meet their individual risk profile and investment goals.
Robo-advisers generally achieve fixed income diversification with the help of ETFs & managed funds.
For example, a busy professional seeking low-fee, automated fixed income portfolio management might use a robo-adviser such as Stockspot to help allocate their assets into bond ETFs.
Institutional investors, including superannuation funds, fund managers, and insurers, dominate Australia’s fixed income market.
Institutional investors generally invest higher minimum investment amounts than most individual investors—typically $500,000+. They often engage directly with corporate bond issuers and are able to access wholesale bond markets with better pricing.
For example, a family office or private wealth fund may access institutional-grade corporate bonds through a bond specialist like FIIG Securities.
Most superannuation funds allocate a portion of their portfolio to fixed income as part of their long-term, tax-efficient strategies.
Pre-mixed portfolio options generally include fixed income through bond ETFs and managed funds as part of their defensive allocation which is aimed at generating income and providing stability during periods of market volatility.
For example, a retiree with a conservative risk profile may choose a superannuation option like Australian Super’s Stable Portfolio which has a relatively high 31% allocation to fixed income.
SMSFs provide more flexibility than traditional super funds as they allow trustees to invest directly in fixed income securities.
There are two main ways SMSFs can invest in fixed income:
For example, an SMSF trustee with a defensive investment strategy may choose to allocate 35% of their fund to government bonds and bond ETFs for the regular income and to help stabilize their returns.
Investors should evaluate the following key factors when comparing fixed income investments to ensure they align with their financial objectives, risk tolerance, and investment horizon.
Yield is an important measure of fixed income returns, and refers to the return an investor earns on a fixed income security expressed as a percentage of its price.
There are three common yield calculations relied upon by fixed income investors:
For example, a five-year bond with a $1,000 face value and a $50 annual coupon payment has a coupon yield of 5% and a yield to maturity of 5%. If the bond is trading just after issue at $950 in secondary market, the current yield would rise to 5.26% while the yield to maturity would be 5.29%.
Credit ratings are used by investors to assess the creditworthiness of bond issuers as they indicate the likelihood of timely interest and principal payments. Rating agencies assess the creditworthiness of an issuer and assign a credit rating to the bonds they issue.
The four major credit rating agencies are S&P Global, Moody’s Investors Service, Fitch Ratings, and Kroll Bond Rating Agency. Each rating agency has its own investment and non-investment grade ratings with most lower risk investment grade ratings ranging from AAA to BBB and most higher risk non-investment grade ratings—also known as high yield or junk bonds—ranging from BB to D.
For example, a conservative investor may use Moody’s credit ratings to analyse and choose AAA-rated Australian Government Bonds, while a higher-risk investor might use them to assess BB-rated corporate bonds due to the higher yields on offer.
Maturity refers to the length of time until a bond’s principal is repaid. In general, short-term bonds are less sensitive to interest rate changes, while long-term bonds offer higher yields.
Short term bonds such as Treasury Notes generally have maturities of less than 3 years, medium term bonds such as corporate bonds generally have maturities of 3 to 10 years, and long term bonds such as government infrastructure bonds tend to have maturities of 10+ years.
As shown below, the value of longer duration bonds are more sensitive to interest rate changes than shorter duration bonds—which explains why duration is a key measure of a bond’s risk profile.
Investors who expect interest rates to fall will generally prefer longer duration bonds, since they are likely to increase in value by more than shorter duration bonds. Conversely, if investors expect interest rates to rise, short duration bonds are likely to fall in value by less than long duration bonds.
For example, an investor expecting higher interest rates in the future is likely to prefer one-year Treasury Notes over longer duration bonds.
Liquidity measures how easily a fixed income security can be bought or sold without significantly affecting its price. In general, government bonds are the most liquid, while corporate and high-yield bonds may have fewer buyers, leading to higher liquidity risk.
The Australian fixed income markets are generally reasonably liquid, including corporate bonds. In fact, recent NAB research showed that oversubscriptions in corporate bond issuances were ‘underpinned by extremely robust levels of investor liquidity.’
For example, a retiree wanting to invest in a fixed income market with excellent liquidity might prefer to invest in ASX-listed bond ETFs instead of OTC corporate bonds.
Interest payments on government and corporate bonds are generally taxed as income although fixed income investments have varying tax treatments, depending on the security type and investor profile.
There are tax advantages available to investors who own fixed income within their superannuation or SMSFs. As the ATO advises: ‘the income of your SMSF is generally taxed at a concessional rate of 15%. To be entitled to this rate, your fund has to be a complying fund that follows the laws and rules for SMSFs. For a non-complying fund, the rate is the highest marginal tax rate.’
For example, a complying SMSF investor may benefit from the 15% concessional tax rate on their SMSF bond income, making fixed income a tax-efficient investment for them.
Investors can approach fixed income investments with different strategies depending on their risk tolerance, time horizon, and macroeconomic outlook.
Below are some of the most widely used fixed income trading strategies.
A buy-and-hold strategy involves purchasing fixed income securities and holding them until maturity to receive the regular interest payments and the full principal repayment. This is a common strategy for conservative investors such as retirees who are focused on generating predictable income while improving their portfolio stability. Returns are more predictable than for most shorter term strategies since investors receive a bond’s full face value at maturity unless default occurs.
A buy-and-hold strategy generally results in lower transaction costs and stress levels than strategies requiring more frequent trading. According to Inbestme, buy-and-hold investing is ‘a good way to keep your sanity in the chaotic world that markets can be.’
For example, a retiree seeking steady, predictable income may buy and hold a range of government bonds with staggered maturities (known as bond laddering) to provide consistent cash flow over the long-term.
Active bond trading involves buying and selling bonds in the secondary market before maturity to capitalize on price movements. This strategy is suited to institutional investors and sophisticated traders as it requires an understanding of interest rate trends, credit risk shifts, macroeconomic analysis, duration management, yield curve positioning, and risk management. Transaction costs are generally high due to the frequent trading involved.
Active bond trading offers the potential to generate capital gains in a range of scenarios such as falling interest rates, improving credit ratings, or a flight to safety leading to higher demand for government bonds.
The objective of most active trading strategies is to outperform a passive approach. According to Pimco, a leading active bond fund manager: ‘studies of long-term performance have shown that active bond mutual funds and ETFs – unlike their equity counterparts – have largely outperformed their passive peers after fees.’
For example, a bond trader anticipating an RBA rate cut may buy long-term corporate bonds at a discount in the expectation the bond’s price will increase as and when rates fall.
Bond laddering is a strategy whereby income-focused investors, often retirees, spread their fixed income investments across bonds with different maturities to reduce their reinvestment risk while maintaining cash flow flexibility.
As shown below, by replacing maturing bonds with newer ones, bond laddering ensures long-term average returns are smoothed out and interest rate risk is minimized.
For example, a conservative investor may invest in a mix of 3-, 5-, and 10-year bonds so that part of their portfolio matures every few years, allowing them to reinvest at current interest rates.
The barbell strategy involves investing in both short-term and long-term bonds, while avoiding intermediate-term bonds. This is a relatively complex active strategy which balances risk and return by lowering reinvestment risk.
This strategy benefits from the liquidity provided by short-term bonds as well as the generally higher yields offered by long-term bonds—as shown below.
For example, an investor expecting interest rate volatility might hold 1-year bonds offering a 4.25% yield to maturity for their liquidity, as well as 10-year bonds offering a more attractive 5.25% yield to maturity.
Bond swapping involves selling one bond and replacing it with another to improve a portfolio’s overall return, adjust for tax efficiency, or take advantage of market changes.
There are three main types of bond swaps:
For example, an investor holding underperforming corporate bonds might swap into higher-rated government bonds for improved security amidst uncertain market conditions.
Australian fixed income investing is a core asset class for individuals and institutions who are seeking steady income and portfolio stability. Most fixed income investments are regarded as defensive and less likely to be affected by an economic downturn or market volatility compared with growth assets like equities. As a result, this asset class is integral to achieving investors’ goals while mitigating their overall portfolio risk.
By understanding the types of Australian fixed income investments available, assessing their features and risks, and utilizing the most appropriate investment methods, investors can effectively navigate this market.
Explore fixed income investments on Investment Markets armed with a clear picture of what’s right for your needs, as well as the questions you need to ask yourself to find the right fit.
Yields vary based on economic conditions and the type of bond, but they generally range from 2% to 7% in the current market environment.
While Australian government bonds are amongst the safest fixed interest investments, they are not completely risk-free, particularly in relation to interest rate and inflation risks.
Interest payments on fixed income securities are typically made semi-annually or annually, depending on the specific terms of the instrument.
Yes. While Australian fixed income investments are generally less volatile than stocks, they can still incur losses due to interest rate changes, credit defaults, or economic downturns.
Investors can diversify their Australian fixed income portfolios by including a mix of different types of bonds, such as government, state, and corporate bonds, as well as varying maturities and sectors.
Alternatively, by investing in a fixed income ETF or managed fund, investors can gain access to diversified portfolios.
Australian fixed income investments can provide steady income, preserve capital, and reduce overall portfolio volatility. They can also act as a counterbalance to equities during market downturns.
The yield curve – also known as the term structure of interest rates – shows the yield on bonds over different terms to maturity.
The yield curve is important for investors as it provides insight into future interest rate changes, economic expectations, and the most appropriate investment strategies.
Credit ratings assess the creditworthiness of bond issuers. Higher ratings (e.g. AAA) indicate lower default risk, while lower ratings (e.g. junk bonds) indicate higher risk. Investors can use these ratings to gauge the risk-return profile of various fixed income securities.
