Highlights

  • Betashares Active Australian Hybrids Fund (ASX:HBRD) provides actively managed exposure to Australian hybrids and other Credit securities.
  • The fund carries an indicated Dividend Yield of 5.70% as on 1 September 2026.
  • HBRD is down 0.79% over the past year.
  • The phase-out of bank hybrids is changing the fund’s Investment universe and increasing the importance of reinvestment decisions.

Australia's bank hybrid market is entering a long wind-down after APRA confirmed it would phase out these securities as regulatory capital, reshaping a corner of the market that income investors have leaned on for years. The Betashares Active Australian Hybrids Fund (ASX:HBRD) is an actively managed portfolio of hybrid securities and other credit, listed since November 2017. That transition makes how the fund is positioned more relevant than ever, since the pool of securities it has traditionally invested in is set to shrink over the coming years.

What the ETF Does

HBRD is an actively managed fund that invests mainly in Australian hybrid securities, with the flexibility to hold cash, bonds and other credit to manage risk.

Hybrids are complex instruments that combine characteristics of Debt and equity. They typically pay distributions that may carry franking credits, but they can also be converted into shares or written down in stress scenarios if a bank's Capital falls below specified triggers.

Active management allows the portfolio to reduce exposure when hybrids appear expensive or risky, distinguishing HBRD from a passive strategy that remains fully invested. This flexibility becomes increasingly relevant as the hybrid market contracts because the manager can rotate into other areas of credit rather than relying solely on a shrinking securities universe.

Why It Is in Focus

Betashares Active Australian Hybrids Fund (ASX:HBRD) carries an indicated dividend yield of 5.70% as on 1 September 2026, with distributions paid monthly.

The fund is particularly relevant because APRA's decision to phase out bank hybrids as Additional Tier 1 capital means new issuance is winding down while existing securities are expected to be called over the coming years.

As Supply contracts, the way the fund reinvests proceeds from maturing and called securities will increasingly influence its income profile and overall risk exposure. The transition could also encourage the portfolio to allocate more capital towards other areas of credit as the traditional hybrid opportunity set becomes smaller.

Performance and Income

Betashares Active Australian Hybrids Fund (ASX:HBRD) is down 0.79% over the past year, while its indicated dividend yield stands at 5.70% as on 1 September 2026.

Hybrid returns combine income with changes in capital values, which can move with credit spreads, investor sentiment and broader financial-market conditions.

Distributions vary with underlying coupons and the level of franking and are not fixed. The income component can be relatively steady, while capital values may fluctuate more significantly during periods of credit-market volatility.

The fund's future return profile may also change as the Australian hybrid market undergoes a structural transition and the manager increasingly considers alternative credit opportunities.

What Could Drive It Next

The pace of hybrid calls and redemptions through the APRA phase-out will be an important Factor for HBRD. As securities are redeemed, the manager's decisions about where to reinvest the proceeds will shape both yield and portfolio risk.

Credit spreads on bank securities are another key driver. Narrower spreads can support hybrid prices, while wider spreads during periods of market stress may weigh on valuations.

Broader bank-sector health and investor risk appetite also matter because hybrids can behave more like equities during periods of financial stress.

As the investable hybrid universe contracts, the manager's assessment of relative value between remaining hybrids, bonds and other credit securities is likely to become an increasingly significant contributor to portfolio outcomes.

Risks to Watch

Hybrids carry a combination of credit, interest-rate and equity-like risks. In severe stress scenarios, securities can be converted into shares or written down, meaning they are structurally more complex than conventional bonds.

The regulatory phase-out also introduces reinvestment risk. As hybrids are called, proceeds may need to be redeployed into securities offering different yields or risk characteristics.

Active management creates another source of variability because portfolio outcomes depend partly on the manager's allocation and security-selection decisions.

Franking benefits also depend on individual tax circumstances, while the 5.70% indicated dividend yield as on 1 September 2026 is not a guaranteed future income rate.

Closing

Betashares Active Australian Hybrids Fund (ASX:HBRD) provides actively managed exposure to a market undergoing a significant structural change.

Its 5.70% indicated dividend yield as on 1 September 2026 keeps income generation in focus, while the 0.79% decline over the past year highlights that capital values can still fluctuate.

As Australian bank hybrids are progressively phased out, the fund's ability to reposition into other credit opportunities will become increasingly important. HBRD therefore remains an income-oriented vehicle, but its evolving portfolio mix and the complexity of hybrid securities remain central considerations.