The number and scope of fixed income funds in Australia has grown in recent years, reflecting the growing demand from investors for breadth and depth. Some of these fund use strategies that are new to the domestic Australian market and give investors greater scope to diversify their portfolios. From an investor perspective, since some of these funds are newly launched, their strategies may only have short track records. Some of the funds some of the time can assume significant credit risk. Naturally, past performance is not a guide to future performance. As a result of their brief track records, some may have had no experience of managing their way through a rising interest rate environment and tricky credit environments.
The list below shows some of the new fixed interest strategies introduced within investment trusts, some of them brought to market by leading global bond managers in the last few years. The majority of the unlisted investment trusts are multi-strategy income or diversified credit funds geared to delivering a higher return than traditional fixed interest offerings. Often the investment strategies do not use a benchmark and are free to pick and choose where to invest. Multi-strategy funds include riskier assets like high yield credit and emerging market debt while diversified credit funds may include investment grade corporate bonds and often will have no exposure to interest rates.
Unlisted fund launches in fixed interest in Australia
Advance Defensive Yield Multi-Blend Fund
Invests in a diversified mix of fixed interest, cash and cash equivalent securities and instruments in both Australian and international markets, with an emphasis on liquidity and capital stability regardless of the overall direction of fixed interest and cash markets.
AllianceBernstein Dynamic Global Fixed Income – Australian
Implements a global, multi-sector strategy investing in a broad range of debt securities. The fund may hold corporate bonds, government bonds, ABS, MBA and bank loans located anywhere in the world, including emerging countries. Up to 40 per cent of the fund’s assets may be high risk and rated below investment grade.
AllianceBernstein Global High Income Fund
Invests primarily in corporate debt securities from US and non-US issuers, as well as government bonds from both developing and developed countries, including the US. May invest in debt securities denominated in US dollars or non-US currencies. Under normal market conditions, invests substantially all of the fund’s net assets in lower-rated bonds, but may also invest in investment-grade and unrated debt securities.
Alpha Diversified Fixed Income fund
Invests in a portfolio of global government, semi government, corporate, mortgage, asset-backed, high-yield and emerging-market sovereign debt, and other fixed interest securities while seeking to preserve capital through diversification and prudent investment management.
Antares Income Fund
An income-generating investment opportunity that provides returns by active management of a broad range of domestic and global fixed income assets.
Fidelity Global Strategic Bond
Provides risk adjusted total returns over a five year investment time frame whilst mitigating downside risk and minimising volatility.
Franklin Templeton Global Aggregate Bond Fund
An actively managed, benchmark-aware fund that invests primarily in government and corporate fixed and floating rate securities. The fund seeks to maximise total investment return, consisting of a combination of interest income and capital appreciation. Invests mainly in investment grade securities, but may invest up to 20 per cent in non-investment grade.
Goldman Sachs Global Strategic Bond Fund
Not constrained to its benchmark and can invest in a wide range of fixed income and currency markets to generate returns in the given market environment. Eight individual fixed income strategy teams contribute their best ideas from their area of specialty, targeting positive returns in different market phases.
Goldman Sachs Growth & Emerging Markets Debt Local Fund
Seeks to achieve income and capital growth over the longer term through exposure to fixed income securities of emerging country issuers, denominated in the local currency of such countries.
JPMorgan Global Strategic Bond Fund
‘Best ideas’ actively managed unconstrained global bond fund. Invests in a diversified opportunity set across global fixed income and currency markets. Dynamic sector management, aiming to only take risk when compelling investment opportunities are identified.
Lazard Emerging Markets Total Return Debt Fund
An actively managed portfolio with active asset allocation across the full spectrum of the emerging market debt universe. The fund is benchmark agnostic seeking to deliver an absolute return from the effective selection of underlying debt securities and manages the premium available from emerging markets debt relative to developed fixed income assets.
Mason Stevens Credit Fund
Designed to generate returns in excess of 3.5 per cent per annum above the RBA Cash Rate after fees and expenses by investing in an actively managed portfolio of interest rate securities. The securities can be denominated in any major currency and will generally be hedged back to the AUD.
Mercer Emerging Markets Debt Fund
Designed to provide investors with a diversified portfolio of primarily local currency emerging market debt assets and strategies, with the aim of outperforming the benchmark over periods of one year or greater.
netwealth Australian Bond Index Fund
Invests in the securities comprising the UBS Composite Bond All Maturities Index in a way that replicates the performance of that index. Generally this is done by the underlying fund purchasing a selection of the securities that form the index, although derivatives such as futures, forwards and options may be used in certain circumstances to provide part of the exposure.
Payden Global Income Opportunities Fund
An actively managed fund designed to generate an absolute rate of return above the UBS Bank Bill Index. The fund is managed to the Payden Absolute Return Investing strategy.
Pepper Investment Management High Income Fund
Invests in a pool of eligible assets, primarily focused on opportunities in residential mortgages and leasing receivables and short term money market securities with no commercial property exposure.
Perennial Income Focused Trust
Designed to offer unit holders a well-diversified portfolio of higher yielding securities that are of sound credit quality and generate the majority of their return from regular interest payments. Invests in corporate bonds and corporate floating rate notes, ABS and hybrid securities.
PIMCO EQT Wholesale Australian Bond B
An actively managed portfolio of fixed interest securities predominantly denominated in Australian and New Zealand currencies.
Realm High Income fund Wholesale
Invests in domestic investment grade asset-backed, bank-issued and corporate bonds. The fund may also invest in commonwealth and state government securities, inflation-linked securities, hybrid securities, revolving credit facilities, bank term deposits, international agency, supranational debt and derivatives. Derivatives can be used to implement investment decisions, including hedging and as a risk management tool.
T Rowe Price Dynamic Global Bond Fund
Maximise total return and provide income through investment primarily in a portfolio of fixed income securities which may include transferable debt securities of governments and their agencies, supranational organisations, corporations and banks as well as mortgage-backed and asset-backed securities.
Vanguard Australian Inflation Linked Bond Index Fund
Invests in capital indexed bonds issued by the commonwealth government with maturities greater than one year. The fund offers a fixed income strategy that preserves the risk characteristics of the asset class by investing in a range of high grade government issued inflation-linked bonds.
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Paul McNamara is an editor and journalist with over 20 years’ experience. His career includes spells with the Financial Times, Euromoney, BRW Media, Asia-Inc and Banker Middle East. At present he is editor of YieldReport. YieldReport is a digital newsletter that carries comprehensive pricing and commentary on Australian interest rate securities in a monthly and weekly report. Each issue covers bank bills, cash accounts, term deposits, government bonds, semi-government and corporate bonds, hybrids, ETFs, managed funds and more. Click here for a free trial subscription. |
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