Get to know Corporate Bonds

The fixed income asset class covers a range of investment options, such as corporate bonds and term deposits. Corporate bonds offer the potential to earn better returns than cash, predictable income, capital preservation and portfolio diversification.

The Benefits of Corporate Bonds

Better returns
Predictable income
Capital preservation
Diversify your portfolio

Corporate Bonds generally pay a higher income return than cash and term deposits.

Source: Gross returns for 20 years to 30 June 2020. Vanguard Investments Australia Ltd

Predictable income

Corporate bonds provide a regular income stream through interest payments.

Capital preservation

Corporate bonds are a lower risk investment than shares in the same company because your principal must be repaid when the bond matures.

Diversify your portfolio

Diversifying your investments across different asset classes and markets is an important way to protect your wealth from the impact of market changes, interest rates, currency fluctuations and inflation.

Through bonds, you can also invest in assets that would otherwise be out of reach.

How bonds work

Companies and governments issues bonds as a way of raising funds. They borrow funds from investors in the form of bonds, making it a form of debt. When you purchase a bond, the bond issuer is legally obliged to pay you regular interest and at the bond’s maturity pay back to you the face value of the bond.

This provides investors a greater deal of certainty, as you are paid interest income, and your capital should be returned at maturity.

How to invest in Corporate Bonds

You can invest directly in Corporate Bonds through FIIG. It’s accessible, straightforward and transparent. There are two options, depending on how much time you want to spend thinking about your choice of Corporate Bonds.

DirectBonds
Our DirectBonds services enables you to build a personalised Corporate Bond portfolio to suit your investment goals. Choose from over 400 bonds, from $10,000 per bond with a minimum portfolio balance of $250,000.
Managed Income Portfolio Service (MIPS)

If you want direct access to the Corporate Bond market but don’t have the time or expertise to make these decisions, MIPS combines the benefits of owning Corporate Bonds directly with the services of a professional portfolio management team. You still directly own your Corporate Bonds but FIIG constructs and manages the portfolio to match your investment goals and risk appetite.

Frequently asked questions

Can you give me names of companies who have issued bonds?
How are corporate bonds different to shares?
How do bond returns compare to equities?
What is Face Value?

Bonds are issued by many companies – from well known companies such as BHP, Qantas and Commonwealth Bank to smaller companies such as G8 Education and Praeco.

Over 400 bonds are available via FIIG’s DirectBonds Service. Wholesale qualified investors can also invest in foreign currency denominated bonds, including USD, GBP and Euro bonds.

When you purchase shares in a company, you become a part owner of that company and there’s no certainty of income via dividends. With corporate bonds, you lend money to the company that issues the bond and it is legally required to pay you regular interest and repay the face value of the bond when the bond matures. This means that investing in a company’s bond is a lower risk than owning its equity or shares.

Another major difference between shares and bonds is that shares are generally traded on an open exchange such as the ASX, whereas the majority of corporate bonds are traded on the Over the Counter market.

Australian bonds have outperformed cash and Australian shares in the 10 years to December 2015:

Source: Gross returns for 10 years to December 2015, ASX 2016 Long term Investing Report May 2016.

Face value is the initial capital value of the corporate bond and the amount repaid to the bondholder at maturity. The face value of a corporate bond is set at the time of issue and is usually $100.

Bond Portfolios

5.71% p.a.^{^}

Conservative Portfolio

This portfolio has 10 securities with weightings between 9.17% and 10.45%, yielding 5.71% pa. It is designed for investors wanting a 100% allocation of investment grade bonds. The returns shown are based on ~$490,000 investment. $50,000 is the minimum amount that can be invested with FIIG.

6.83% p.a.^{^}

Balanced Portfolio

This portfolio has 16 securities with weightings between 3.23% and 10.35%, yielding 6.83% pa. It is designed for investors wanting a balanced allocation of investment grade and sub investment grade bonds. The returns shown are based on a ~$605,000 investment. $50,000 is the minimum amount that can be invested with FIIG.

8.00% p.a.^{^}

High Yield

This portfolio has 17 securities with weightings between 3.90% and 10.18%, yielding 8.00% pa. It is designed for investors seeking a higher return and who are comfortable with a corresponding increase in credit risk. The returns shown are based on a ~$508,000 investment. $50,000 is the minimum amount that can be invested with FIIG.

^Pricing as at 4 December 2024. Subject to change.

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