Australian income specialist MST Financial has launched the MST Hybrid Transition Strategy, a new investment framework designed to help advisers and investors navigate the structural phase-out of listed bank hybrids and the evolving income landscape.
The strategy combines the actively managed Sandstone Income SMA with the ability to allocate to the MST Monthly Income Fund (MIF), creating a broader and more flexible income framework spanning both ASX-listed and institutional OTC credit markets.
The launch is particularly timely, with the first major bank hybrid call date approaching in mid-June and APRA’s planned removal of Additional Tier 1 (AT1) bank hybrids expected to trigger one of the largest reinvestment cycles in the Australian retail income market. More than $38 billion of listed bank hybrids are expected to progressively roll off over coming years.
Managed by Cameron Duncan and Steve Anagnos, the Sandstone Income SMA has historically focused on actively managing ASX-listed hybrids and income securities. Under the enhanced Hybrid Transition Strategy framework, portfolios now have the ability to allocate to the MST Monthly Income Fund, managed by Garreth Innes, providing access to institutional-grade credit opportunities beyond the ASX.
These include:
OTC hybrids
Tier 2 subordinated debt
senior secured / unsecured corporate credit
structured income opportunities
institutional primary issuance
MST said the strategy was developed in response to the structural evolution occurring across Australian income markets, where investors are increasingly seeking broader and more actively managed income solutions capable of accessing opportunities beyond the ASX-listed hybrid market.
The firm believes the next generation of income portfolios is likely to become more diversified, more institutional and more dynamic in nature, with active allocation across listed hybrids, OTC credit, institutional floating-rate securities and future capital market opportunities becoming increasingly important as the market evolves.
The MST Monthly Income Fund provides access to a significantly broader institutional opportunity set across sectors, issuers and structures, including securities with similar floating-rate characteristics to listed hybrids while offering improved diversification and attractive relative value opportunities.
MST said the Hybrid Transition Strategy is designed both for existing hybrid investors managing the gradual redemption of bank AT1 securities, and for new investors seeking diversified floating-rate income exposure in a higher interest rate environment.
The strategy also incorporates active management of reinvestment timing, relative value, liquidity and after-tax portfolio outcomes — themes MST believes will become increasingly important amid evolving market conditions and recent changes to the tax landscape.
MST Financial CEO Gerard Satur said the launch reflects the firm’s broader strategy of building institutional-quality investment capabilities for the evolving needs of Australian wealth management.
“Australian income investing is undergoing one of its most significant structural transitions in decades,” said Satur.
“By combining listed market expertise with institutional fixed income capabilities, MST is building a differentiated platform designed to help advisers and investors navigate the next phase of the income market.”
“Importantly, we are increasingly partnering with wealth management firms to help advisers and clients manage the transition away from traditional bank hybrid portfolios toward broader institutional income solutions.”
The strategy is supported by MST’s broader research, execution and capital markets capabilities.