Subordinated Debt Risks Highlighted in VanEck’s Latest Bond ETF Disclosure

VanEck’s Bond ETF Suite – A Refreshed Offering

VanEck Investments Limited has issued an updated Product Disclosure Statement (PDS) dated 1 December 2025, covering seven Australian bond exchange traded funds (ETFs) listed on the Australian Securities Exchange (ASX) under the AQUA Rules. This comprehensive document replaces prior disclosures for all funds except the Australian Fixed Rate Subordinated Debt ETF (FSUB), which remains pending ASX quotation.

The funds provide investors with diversified exposure to a range of fixed income instruments, including Australian government bonds with maturities spanning from 1 to over 20 years, corporate fixed rate bonds, floating rate notes, and subordinated debt instruments. Each ETF tracks a specific reference index maintained by reputable providers such as S&P Dow Jones Indices and Bloomberg, ensuring transparent and passive management strategies.

Investment Strategy and Structure

Each fund operates as a registered managed investment scheme, structured as an open-ended unit trust. Investors acquire ETF units that represent beneficial interests in the pooled assets, enabling cost-effective access to diversified bond portfolios through a single trade on ASX. The funds employ a representative sampling approach to replicate the risk and return profile of their respective reference indexes, with allowances for portfolio rebalancing and the use of derivatives for risk management.

Liquidity is supported by appointed Market Makers who facilitate trading throughout the ASX trading day, aiming to keep ETF unit prices close to their net asset values (NAV). Authorised Participants (APs) play a critical role in the primary market by creating and redeeming units directly with VanEck, while retail investors trade units on the secondary market like ordinary shares.

Risk and Fee Considerations

The PDS provides an extensive overview of risks inherent to bond investing, including interest rate fluctuations, credit and default risks, and liquidity constraints. Subordinated debt ETFs (FSUB and SUBD) carry additional risks due to their position lower in the capital structure, including potential loss absorption and deferred interest payments. VanEck emphasizes the importance of investors understanding these risks and consulting financial advisers to align investments with individual risk tolerances.

Fee structures are transparent, with management fees ranging from 0.22% to 0.32% per annum and no performance fees charged. Transaction costs are minimal, and dividend distributions are expected monthly, with options for reinvestment through a Dividend Reinvestment Plan (DRP). The PDS also outlines the potential for negotiated fees for wholesale clients and APs.

Regulatory and Operational Framework

Operating under the ASX AQUA Rules, these ETFs benefit from a tailored regulatory framework that differs from traditional ASX-listed equities. VanEck, as the Responsible Entity, manages the funds with fiduciary duties to investors, supported by service providers including State Street as custodian and MUFG Corporate Markets as registrar. The PDS details governance, compliance, and disclosure obligations, including continuous disclosure practices and ASIC relief provisions specific to ETFs.

Investors are reminded that while the funds offer diversified exposure and liquidity, returns are not guaranteed and past performance is not indicative of future results. The PDS encourages investors to review the detailed information available on VanEck’s website and to seek professional advice before investing.