Investors take another look at Australian bonds

Domestic bonds are typically under-represented in Australian portfolios, but recent volatility in the share market is making investors reassess them.

Australians have a total asset allocation to government and corporate bonds of about 13 per cent, whereas in other G20 countries the figure is between 20-30 per cent, according to Omega Global Investors director of investments Mathew McCrum.

He added that with an increasing number of superannuation members moving out of the accumulation phase and into the drawdown period, there would be a rise in demand for defensive assets.

"Australia is in an enviable fiscal position compared to many other developed nations and Australian Government bonds provide an attractive yield, especially on a risk-adjusted basis," said McCrum.

"Australian corporate bonds also compare very favourably to their European and US counterparts, especially in the current market. This gives investors access to increased diversification and higher yields," he added.

Omega Global Investors has released the Australian Bond Fund, which McCrum said carefully selected bonds on a risk-controlled basis because "simply following the benchmark is inefficient".

The Australian Bond Fund will open on 9 September and will start with $200 million in funds under management.