Highlights

  • Diversified Hybrid Exposure: HBRD provides access to a diversified portfolio of Australian bank-issued AT1 Capital Notes and Tier 2 floating-rate subordinated debt securities.
  • Actively Managed Strategy: Unlike index ETFs, HBRD’s portfolio allocations are actively managed, allowing adjustments based on credit conditions, pricing, and market dynamics.
  • Floating-Rate Income Structure: The majority of holdings pay floating-rate distributions linked to BBSW, meaning income adjusts in line with interest rate movements.

The BetaShares Australian Hybrids Active ETF (ASX:HBRD) is an actively managed exchange-traded fund listed on the Australian Securities Exchange (ASX). The fund provides investors with exposure to a diversified portfolio of Australian hybrid securities, primarily issued by major banks and financial institutions.

Managed by BetaShares Capital Ltd, HBRD is designed to give investors access to bank-issued Additional Tier 1 (AT1) capital securities, Tier 2 subordinated debt, and floating-rate notes (FRNs). Unlike passive ETFs that track an index, HBRD is actively managed, meaning portfolio allocations are adjusted by the investment team based on market conditions, pricing, credit risk, and regulatory developments.

As at 31 December 2025, the portfolio reflects broad exposure to Australia’s major financial institutions and a mix of capital instruments structured under Basel III regulatory requirements.

What Is HBRD and How Does It Work?

HBRD provides investors with access to the Australian hybrid securities market through a single ASX-listed vehicle. Hybrid securities sit between traditional bonds and equities in a company’s capital structure. They typically offer higher income than senior bonds but carry more risk due to their subordinated status.

The fund invests predominantly in:

  • Bank-issued Additional Tier 1 (AT1) Capital Notes
  • Tier 2 subordinated floating-rate notes
  • Select subordinated debt from international banks operating in Australia
  • A small allocation to cash and cash equivalents

Because the fund is actively managed, security selection, portfolio weightings, and duration positioning are adjusted based on market pricing and credit assessments.

Portfolio Composition as at 31 December 2025

BetaShares published its quarterly portfolio disclosure on 27 February 2026 for the period ending 31 December 2025. The portfolio shows significant exposure to Australia’s Big Four banks — Commonwealth Bank of Australia (ASX:CBA), Westpac Banking Corporation, National Australia Bank (ASX:NAB), and Australia and New Zealand Banking Group (ASX:ANZ).

Top Holdings by Weight

The largest individual positions include:

  • Westpac Banking FRN 23/6/33 — 3.21%
  • ANZ Bank FRN 16/5/33 — 3.17%
  • National Australia Bank FRN 18/11/31 — 3.13%
  • ANZ Bank FRN 15/1/35 — 2.70%
  • Commonwealth Bank FRN 14/4/32 — 2.55%
  • ANZ Bank FRN 16/1/34 — 2.47%
  • Commonwealth Bank FRN 12/9/35 — 2.46%
  • Westpac Banking FRN 29/1/31 — 2.20%
  • ANZ Bank FRN 25/7/39 — 2.16%
  • ANZ Capital Notes No. 9 — 2.08%

No single holding exceeds approximately 3.2% of the portfolio, indicating diversification across issuers and maturities.

The fund also maintains:

  • Cash and cash equivalents: 1.81%
  • Minor negative positions in Australian 10-year and 3-year bond futures (used for duration management)

Understanding the Securities Held in HBRD

The majority of securities in HBRD fall into two regulatory capital categories:

Additional Tier 1 (AT1) Capital Notes

AT1 securities are perpetual instruments that form part of a bank’s regulatory capital under Basel III rules. These securities:

  • Pay floating-rate distributions linked to the Bank Bill Swap Rate (BBSW)
  • Include conversion or write-down mechanisms if capital ratios fall below trigger levels
  • May be redeemed by the issuer on specified call dates

AT1 securities are often listed under names such as “Capital Notes” or “PERLS” (Preferred Equity Redeemable Listed Securities).

Tier 2 Subordinated Debt (Floating Rate Notes)

Tier 2 instruments are fixed-term subordinated bonds that rank above AT1 but below senior unsecured debt. These securities:

  • Typically mature within 5 to 10 years
  • Pay floating interest rates
  • Do not include equity conversion mechanisms like AT1 instruments

Income Characteristics of Hybrid Securities

Hybrid securities are typically income-oriented investments. Most instruments in HBRD’s portfolio pay floating-rate distributions, meaning returns adjust as interest rates move.

This floating-rate structure means:

  • Income may rise if benchmark interest rates increase
  • Duration sensitivity is generally lower than fixed-rate bonds
  • Credit spreads remain an important pricing factor

Hybrids often offer higher yields than government bonds and senior bank debt due to their subordinated status.

International and Additional Exposure

Although the portfolio is predominantly Australian, it includes limited exposure to international financial institutions operating in the Australian market, including:

  • Rabobank
  • Barclays PLC
  • Crédit Agricole SA
  • Royal Bank of Canada

The fund also holds a small allocation to the BetaShares Australian Major Bank Subordinated Debt ETF (BSUB), representing 0.79% of the portfolio as at 31 December 2025.

Key Risks Associated with Hybrid Securities

Hybrid securities carry distinct risks that differ from traditional bonds:

Capital Structure Risk

AT1 securities rank below senior debt and deposits. In stress scenarios, conversion into equity or write-down may occur before senior creditors are affected.

Call and Extension Risk

Issuers may choose not to redeem securities at the first call date, extending the investment’s maturity profile.

Market and Liquidity Risk

Market conditions can affect pricing and liquidity. During periods of financial stress, trading spreads may widen.

Credit Spread Risk

Even though floating rates reduce interest rate duration risk, widening credit spreads can lead to capital price declines.

ETF Market Pricing Risk

As an ASX-listed ETF, HBRD may trade at a premium or discount to its net asset value (NAV) during periods of volatility.

Positioning Within an Income Portfolio

HBRD sits between traditional fixed income and equities in terms of risk and return characteristics. It provides access to subordinated bank capital instruments with income levels typically above government bonds and term deposits.

The floating-rate nature of most holdings differentiates hybrid securities from fixed-rate bonds, particularly in environments where interest rates fluctuate.

Transparency and Reporting

BetaShares provides:

  • Quarterly portfolio disclosures
  • Daily NAV updates
  • Fund performance information

The 31 December 2025 portfolio disclosure, released on 27 February 2026, details all securities and weightings held by the fund at that date.

Investors can access the Product Disclosure Statement (PDS) and Target Market Determination (TMD) via the BetaShares website for detailed fund information.

Key Facts Summary

  • ASX Code: HBRD
  • Fund Type: Actively Managed Hybrid Securities ETF
  • Issuer: BetaShares Capital Ltd (AFS Licence 341181)
  • Portfolio Date: 31 December 2025
  • Primary Issuers: Westpac, ANZ, NAB, Commonwealth Bank, Macquarie
  • Instrument Types: AT1 Capital Notes, Tier 2 Floating Rate Notes
  • Cash Allocation:81%
  • Internal ETF Holding: BSUB (0.79%)

The BetaShares Australian Hybrids Active ETF (ASX HBRD) provides structured exposure to Australia’s hybrid securities market through active portfolio management. Its holdings primarily consist of bank-issued capital instruments structured under regulatory frameworks, offering floating-rate income and diversified exposure within the subordinated debt segment of the financial sector.

FAQs

  1. What does HBRD invest in?

HBRD invests primarily in Australian hybrid securities, including Additional Tier 1 (AT1) Capital Notes and Tier 2 subordinated floating-rate notes issued mainly by major Australian banks.

  1. Is HBRD a passive or active ETF?

HBRD is an actively managed ETF. The investment team selects securities and adjusts portfolio weightings rather than tracking a fixed index.

  1. How does HBRD generate income?

The fund earns income from floating-rate interest payments and distributions from hybrid securities. These payments are generally linked to benchmark rates such as BBSW plus a margin.