Recent research from Deloitte Access Economics revealed that Australia's corporate bond market
is growing, representing a large opportunty for high net worth individuals. Despite this, it is not
currently given the attention of other investment options in Australia.
In Australia, the Corporate Bond market has grown by more than 40% since 2010
The market is around 70% the size of the listed share market (ASX), and there are currently over $1 trillion of Australian corporate bonds outstanding.
Average gross annual return for Australian bonds is higher than for Australian shares
The growth potential for bond investments is huge: average gross annual return for Australian bonds was 6.1% between 2006-16, compared to 4.3% for Australian shares.
Research showed that 86% of corporate bond investors have had a positive experience,
and a net 37% intend to invest more in the next 12 months.
Of those who don't yet invest in corporate bonds, a net 15% intend to over the next 12
months, meaning the share of high net worth individuals owning corporate bonds could
grow from 16% to 29%.
Individuals who invest in corporate bonds cite the following as the top reasons:
A reliable income stream
The level of return given the risk profile
Corporate investors cite similar reasons for holding corporate bonds.Download full Deloitte report
Despite high returns and the huge available market,
current investment in bonds is much lower than other asset classes in Australia.
Only 16% of high net worth individuals in Australia directly own corporate bonds
Only 47% of the corporate bond market is owned by Australian investors, and private investors hold less than 1% of all corporate bonds on issue in Australia (compared to almost 20% in the United States).
Corporate bonds are 11% of total portfolio assets for individuals with direct holdings
Direct investment in the fixed income asset class such as
corporate bonds remains underdeveloped in Australia compared
to other developed countries.
John O'Mahony Deloitte Access Economics Partner
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in the full Deloitte Corporate Bond Report 2018