Morningstar senior research analyst Kathryn Young said some of these strategies mark the entrance of some world-class bond managers to Australia and offer flexible ways to meet investor needs.
However, Ms Young said Morningstar is “typically wary when there are clusters of similar fund launches because often they represent the newest investment fad that has performed well in recent times”.
Over half of all new unlisted investment trusts to enter the market are multi-strategy income funds or diversified credit strategies, according to Morningstar.
“We think this type of approach has merit but there are reasons for caution,” said Ms Young.
“Most have relatively short track records, take on meaningful amounts of credit risk and can be fairly tactical,” she said.
In terms of emerging market debt, Ms Young questioned whether an allocation to this area was necessary.
She said while there are skilled managers in this area and these strategies can provide diversification, many of the global bond strategies will often build exposure to emerging markets when prospects are attractive anyway.
Ms Young said ETFs generally offer investors new ways to access traditional parts of the market.
She said some ETFs target a specific bond market segment and that for many investors such a targeted exposure may be unnecessary.
“Some sectors of the local bond market remain fairly shallow in terms of issuance, which may concentrate the portfolios,” said Ms Young.
She said the Russell Australian Select Corporate Bond ETF for example had only five holdings as of 30 April 2014, which were issued by just two of the major banks.
“Still, these vehicles may prove useful for quick and targeted portfolio implementation,” she said.
