The ASX listed credit space has grown significantly over the past few years, both in terms of the number and range of products that are available to invest in. We have seen an increase in both ETF products like CRED and VACF as well as direct-investing products (like the Dominion Listed notes, or the RAM Income Fund) where the investment mimics a bond. In particular, there has been a recent growth in the number of listed products which mimic a Floating Rate Note (FRN). This growth in FRN-like products has likely been accelerated by the phasing out of listed AT1 products. Many alternative styles of investment have rushed to fill this gap in the market. Barriers to entry in fixed income markets remain relatively high, so issuing fixed income style investments via a public market like the ASX allows issuers to access a broader investor base, including a typically larger share of retail participants.
What are Listed Notes?
Listed notes have many superficial structural similarities to OTC bonds. They pay income on a set schedule and they have a final maturity date where the principal is repaid. In particular, the current listed notes all are floating rate notes, which means the interest rate payable does change over time, but according to a predictable pattern set in advance.
Listed notes do differ from regular bonds, however, both in terms of how the investment is set up and the parcels in which they trade. Listed notes have benefits of transparent pricing and the ability to purchase smaller amounts, which is beneficial for smaller investors. The flip side of this is that it can be more expensive and less efficient to buy larger amounts of the product.
A key difference in these listed products and corporate bonds is the underlying investment. Most traditional corporate bonds provide debt to one company, who uses those funds for general corporate purposes. Listed notes, in contrast, will provide funds to a single company, but rather than being used for corporate purposes, the funds are instead used to create an investment portfolio of both public and private investments.
This setup increases diversification for investors but also means that the underlying assets can be less transparent. Because of this, investors should ensure that they are aware of the investment mandate of the manager. This should provide parameters around asset class, rating and concentration of what the manager can invest in.
Listed credit notes also differ from listed investment trusts (LITs) as they have a defined maturity date and coupon. LITs have suffered from a problem where after a successful launch, the LIT would later trade at a price less than net asset value. However, if there was no investor ready to invest in the LIT, there was no way to force the investment price and the book value back together. Since listed credit notes have a defined maturity, they will have a “pull to par” effect over time.
Features that investors should consider
These products are often more complex than investors realise and conducting due diligence is important. Some of the main considerations are:
- Who are the management team and what is their track record?
- What is the underlying portfolio invested in and what guardrails are in place to avoid the manager increasing the risk of the portfolio?
- How much risk is the management team taking and are investors receiving adequate returns to justify this level of risk?
The structure of the investment vehicle itself is also important as there may be an equity tranche in the structure that is retained by the manager. This will typically be subordinated to the notes and will provide a protective buffer in the event that losses occur.
These considerations can get sophisticated very quickly which is why it can be beneficial to invest in these products through investment professionals. When FIIG offers these products to clients we provide an independent credit review to ensure that the product meets our standards. We want to see diversification, appropriate risk and return levels and a clear investment thesis. The investment manager is an important consideration due to their track record as well as the scope of investment opportunities that are available to them. Products to avoid are ones without transparent assets, inappropriate risk levels and low diversification.
Listed credit notes that FIIG clients have invested in
So far FIIG has brought two listed credit note opportunities to our clients. The first one was RAM and the second Stonepeak.
RAM secured income notes are floating rate notes issued by Real Asset Management group (RAM) that were listed on the ASX in September 2025. The notes are the senior tranche of an SPV company with subordination at the note level. This SPV company uses the funds raised to invest into whole loans or mortgage-backed securities originated by Brighten, a non-bank mortgage provider. There is both direct subordination in the notes and indirect subordination through the MBS that the SPV holds. RAM have also laid out clear parameters that define what they can invest in as well as providing target ranges. This provides investors with a good understanding of how their money will be invested and also ensures diversification as the top three obligors have a maximum weighting of 15%. Vehicles such as this note provide investors with access to assets that would normally be limited to sophisticated clients and require a much larger minimum investment.
A second investment that we have participated in is Stonepeak INFRA notes. Stonepeak is a global infrastructure company. The notes are set up in a very similar way to the RAM listed notes and invest into Australian infrastructure assets. The investments are made in the form of loans to these companies. The main four categories of companies that they invest in are communications and digital, energy transition, transport and logistics and social infrastructure. They are floating rate notes that pay 1M BBSW +325bps. The management team have a strong track record and the company is the largest independent infrastructure fund in the world.
Conclusion
The regulator’s decision to end bank hybrids has seen a number of different types of investment try to fill the void. The listed note is one of these, where an investment manager uses the listed market to raise funds and establish a new investment portfolio.
Although similar to basic corporate bonds like FRNs, there are a few complexities under the surface. Investors who are considering investing in these notes should look into the underlying structures and investment managers. When FIIG participates in a listed deal we will provide research covering these key topics.