Fund manager Daintree Capital will this week launch a prospectus for an ASX-listed global bank hybrid fund.
Daintree is pitching the fund, the Daintree Hybrid Opportunities Fund, at investors looking for alternatives to low-yielding government bonds and term deposits.
It is investing globally to provide diversification and to guarantee it has access to plenty of new issuance.
Daintree is targeting a total return of 350 to 450 basis points above the RBA cash rate (net of fees) and income distributions of 2.4 per cent a year, with distributions paid quarterly.
Exchange traded fund provider BetaShares launched an Australian hybrid fund in 2017. Managed by Coolabah Capital, it has produced an average return of 3.99 per cent a year since then. It has a running yield of 2.49 per cent a year.
The hybrid sector has a high level of volatility relative to returns. The Betashares fund has had standard deviation of 5.36 per cent a year since it launched.
Daintree said it will use hedges to smooth volatility.