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This shift isn’t simply a reaction to rising yields. It’s a deeper rethinking of control, cost, and customisation. And at ARC Capital Venture, we’re seeing this play out daily across investor conversations and portfolio allocations.
“Investors today are much more informed and empowered,” says Marios Anastasiou, CEO of ARC Capital Venture. “They understand that with greater control over what you own comes the ability to optimise yield, reduce fees, and align risk more precisely with your objectives.”
From Fund Fees to Fixed Income Freedom
One of the primary catalysts behind this migration is cost. Mutual funds, even passive ones, carry ongoing fees that eat into returns—especially in fixed income, where yields tend to be modest. The typical Management Expense Ratio (MER) on a fixed income fund ranges from 0.5% to 1%, which can significantly reduce net income over time.
With direct bonds, the investor receives the full coupon, minus any initial transaction costs or platform fees. There's no annual skim, no dilution of returns through pooled diversification, and no surprises.
“Fixed income should be about certainty,” explains Anastasiou. “You lock in a yield. You know the maturity. With direct bond ownership, your income isn’t being silently reduced by fees year after year.”
Case Study: Direct vs Fund-Based Fixed Income Exposure
At ARC Capital, one illustrative portfolio features a blend of Rakuten Group and Santander UK PLC bonds—both issued by well-capitalised global names with strong credit ratings. These bonds offer fixed coupons ranging between 6.25% and 7.5%, with maturities inside five years. For investors looking for income and capital return certainty, this portfolio offers both security and yield visibility.
Compare that to the top three Australian fixed income mutual funds, which often hold the same names—but deliver net returns of 4%–5% after fees. That difference may seem small at first glance, but it compounds significantly over a 3–5 year holding period.
More importantly, the investor has little say in the specific bonds held, the turnover rate of the portfolio, or the reinvestment strategy within the fund.
“With direct bonds, what you see is what you own,” says Anastasiou. “In a fund, you’re exposed to the manager’s decisions, including their rebalancing, cash holdings, and even exposure to bonds you may not personally want.”
Transparency and Customisation: Key Drivers of the Shift
Sophisticated investors are increasingly demanding visibility into what they hold. They want to know not just their total return, but exactly which issuers they’re exposed to, what the yield to maturity is, and how the credit risk is managed.
Direct bond ownership delivers on that need. Investors can hand-select maturities that match their cash flow requirements, choose sectors that align with their economic views, and avoid currency exposures or geopolitical risks they’d rather not take on.
For example, ARC clients building portfolios in 2025 are often blending global financial bonds like Santander with e-commerce sector exposure via Rakuten—balancing risk and return across industries and geographies, all while targeting specific durations and currencies.
“You can’t do that in a fund,” says Anastasiou. “You get a basket of assets that may or may not match your goals. With direct bonds, it’s fully personalised.”
The SMSF Advantage: Control and Tax Efficiency
For self-managed super fund (SMSF) trustees, the shift to direct bond ownership offers additional advantages. Not only do they maintain oversight of every position, but they can also optimise tax outcomes. Income timing, currency denomination, and capital treatment at maturity are all more easily managed with direct holdings.
And with today’s bond yields offering 6%–8% on investment-grade credit, many SMSFs are re-evaluating whether fund fees and generic exposure are still worth it.
“The SMSF market is very active right now,” confirms Anastasiou. “We’re seeing trustees reallocate large portions of fixed income exposure away from managed funds toward bespoke bond portfolios—especially when the bonds are backed by globally recognised issuers.”
Why Direct Bonds Are In
The trend toward direct ownership is not a fad—it’s a structural shift. Australian investors are increasingly treating bonds as they would equities: a strategic, individualised component of a well-diversified portfolio.
Rather than leaving allocation to fund managers, they are choosing to build fixed income ladders tailored to their own needs—whether for monthly income, capital protection, or inflation hedging. They’re picking sectors they believe in, like technology, utilities, or banking. And they’re optimising portfolios with transparency, precision, and purpose.
“In 2025, income certainty and control are premium features,” concludes Anastasiou. “Direct bonds give investors the ability to construct that themselves—without relying on a third party to do it for them.”
As interest in global fixed income continues to rise, ARC Capital Venture remains committed to helping Australian investors access institutional-grade opportunities—directly, transparently, and efficiently. Whether you're managing a family office, SMSF, or simply seeking better income alternatives, the future of fixed income may very well lie in your own hands.
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