Fixed Interest Fund
Duration was held neutral through the September Quarter, and as a result gross returns to 30 September were in line with those of the Bloomberg Ausbond Composite Bond Index 0+ over the quarter, down 0.28%. After fees, retail units were down 0.41% and wholesale units were down 0.36%.
While volatile between a band of 4-4.4% over July and August, gross returns for each of those months were positive at 0.52% and 0.73% respectively. While inflation has peaked both domestically and in the US, it has remained persistently above central bank targets, particularly in services, and employment markets have remained resilient.
Through September, as the “higher for longer” central bank narrative took hold, the 10y yield rose some 50bps to just below 4.50%, and September returns were negative as a result, down 1.54% overall and dragging the outcome for the quarter negative as well.
As yields rose in the last weeks of the quarter, the fund has added a small long-duration position in 10y government bonds, believing there is little room for yields to continue to move persistently higher without creating other strains across the economy. We have also taken an overweight position (~5%) in shorter dated credit at the expense of government holdings in order to capture some rolldown as the bonds move toward maturity.
Fixed Interest (Wholesale) Fund Performance
As at 30 September 2023~
| fund | benchmark$ | |
|---|---|---|
| 3 months | -0.4% | -0.3% |
| 6 months | -3.4% | -3.2% |
| 1 year p.a. | 1.4% | 1.6% |
| 3 years p.a. | -4.3% | -3.9% |
| 5 years p.a. | 0.0% | 0.3% |
| since inception p.a. | 1.8% | 2.3% |
$ Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 15/01/2014.
Fixed Interest (Retail) Fund Performance
As at 30 September 2023~
| fund | benchmark$ | |
|---|---|---|
| 3 months | -0.4% | -0.3% |
| 6 months | -3.5% | -3.2% |
| 1 year p.a. | 1.2% | 1.6% |
| 3 years p.a. | -4.4% | -3.9% |
| 5 years p.a. | -0.4% | 0.3% |
| 10 years p.a. | 1.2% | 2.3% |
| since inception p.a. | 1.6% | 2.4% |
$ Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 14/06/2012.
+4.4% relative to index, funded from Commonwealth Government Securities, focused on securities with <3y to maturity.
Additions to the Fund
-
Modified Duration Increase – +0.10 relative to the index via selling a Sep 2026 maturity/buying the Nov 2033 maturity, executed in two tranches in late September.
-
Credit Allocation – +4.4% relative to index, funded from Commonwealth Government Securities, focused on securities with <3y to maturity.
Yields remain under pressure early in the quarter due to persistent inflation and resilient employment markets.
Sector allocation
Sector overweights
Credit +4.41%
Cash +0.08%
Sector underweights
SSA -0.07%
Semi Government -0.12%
Commonwealth Government -4.3 %
*Total returns are calculated using the sell (exit) price, net of management fees and gross of tax as if distributions of income have been reinvested at the actual distribution reinvestment price. The actual returns received by an investor will depend on the timing, buy and exit prices of individual transactions. Return of capital and the performance of your investment in the fund are not guaranteed. Past performance is not a reliable indicator of future performance. Figures showing a period of less than one year have not been adjusted to show an annual total return. Figures for periods of greater than one year are on a per annum compound basis. The current benchmark may not have been the benchmark over all periods shown in the above chart and tables. The calculation of the benchmark performance links the performance of previous benchmarks and the current benchmark over the relevant time periods.
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