Gareth Hutchens
March 26, 2012
Article from The Sydney Morning Herald
The head of fixed income at UBS, Duncan Haig, accepts that bonds are not the most exciting investment. Photo: Quentin Jones
TELLING someone what he does for a living, Duncan Haig is the first to admit, often has people's eyes glazing over.
"We're the pessimists on the dark side of the room, the bright side's down there," says Mr Haig, the head of fixed income at UBS, pointing to the equities traders.
"What's your son do? Oh, he works in the sharemarket or money market or something," jokes colleague Andrew Clark, head of interest rate sales.
Despite all the chaos in global bond markets in recent years, or their crucial role in the massive stimulus packages pushed through by governments around the world, Clarke jokes traders' parents still have no idea what they do.
Large-scale privatisations of Telstra or the Commonwealth Bank have in the past helped Australians fall in love with shares. But bonds, seen as a more stable and less risky asset class than property or equities, are still largely a mystery.
The former head of the federal Treasury, Ken Henry, recently warned about Australians' lack of interest in fixed income and what it meant for the performance of their portfolios in times of crisis.
Since 2007, the market value of the UBS composite bond index — which is used as a benchmark index for 90 per cent of Australia's fixed interest funds — has nearly tripled in size, growing from $207 billion to more than $596 billion.
But that could all be about to change. This year, the Australian Securities and Investments Commission changed the rules to allow bonds, called fixed-income products, to be listed on the stock exchange in exchange-traded funds (ETFs).
That means investors can get exposure to bonds in similar ways to equities.
Last week, iShares launched a range of fixed-income ETFs, using the UBS indices and the Australian Securities Exchange expects at least 10 ETFs to be listed by June.
It has been 25 years this month since the UBS bank bill index, which measures the performance of Australia's short-term money market, was introduced.
Article from The Sydney Morning Herald