$4.4 billion of old-style tier II hybrids, or ‘subs’ may be redeemed in the next few months. This creates a dilemma for advisers, as these were the only ASX securities at that point on the risk-return spectrum. They can’t be replaced.
Subs have lower volatility and are more debt-like than equity-like hybrids. Advisers now have to either go up the risk curve away from fixed income, or down it to bonds/XTBs or bond funds. Staying put isn’t an option as soon the remaining hybrid options will be ‘growth’ rather than ‘defensive’. 2017 may be pivotal for hybrids, with growing researcher concerns that certain securities won’t be called. Future issues may be wholesale only. With uncertainty ever present for growth assets, the range of advisers looking at XTBs is growing as XTB FUM nears the $200m mark.
Table 1: Disappearing Subs to August 2017
|ISSUER||CALL DATE||ISSUE SIZE (mio)||COUPON||MATURITY DATE|
|NABHB||JUN 17||1,188||BBSW+275bp||18 JUN 2022|
|ANZHA||JUN 17||1,530||BBSW+275bp||20 JUN 2022|
|WBCHA||AUG 17||1,704||BBSW+275bp||23 AUG 2022|