October, 2020
Another very solid month for the Fund, as core positioning and active management both added to this month’s returns. Credit was tighter throughout October, and as the primary market slowed, investors bought heavily in the secondary market driving credit spreads tighter.
Post the COVID-19 lows of equity and credit markets in March this year, we have seen the credit market desensitise from the day to day volatility of equity markets. This is largely technical due to central bank intervention in global corporate bond markets and not in equity markets. Additionally, with outright yields continuing to tumble, investors are turning to the corporate bond market in search of incremental yield. The two biggest risks for the market to see out in 2020 hasn’t changed, with the US Presidential Election in full swing and parts of Western Europe going back into shutdown, we have positioned the portfolio accordingly. All of the Fund’s positions had a positive contribution in October. Outperformance was led by Lendlease’s new green bond which rallied an impressive 30bps. Over the past 18 months we have noticed quite a pick-up in green and sustainable bond issuance. In addition to Lendlease’s new green bond, Woori Bank also issued a sustainable bond in October.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/b81742_6426eb03e5a24dc79c63cea1c21a7adc.pdfSeptember, 2020
Credit was wider across the board in September, yet quite resilient compared to the sell off in global equities. Risk sentiment was soured by significant spikes in new COVID-19 cases throughout Europe. France for example, on September 24th had record daily new cases increase by a staggering +16k. However, whilst their new cases surged, their death rate remains very low in comparison. It appears that the virus is being transmitted amongst a younger demographic who are much more likely to recover. We are closely monitoring the daily numbers, as government restrictions are being re-introduced which will obviously have economic consequences. The widening in credit was subdued, yet broad across all sectors of the market. Therefore, the longer dated positions in the Fund suffered the most. The Fund’s 10yr positions in Coles, Woolworths and WSO Finance led the underperformance for September. Outperformance was attributed to the Fund’s positioning in Ausnet, Nextera and Suncorp Metway.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/b81742_aa387aff28c1482cac39b54803a939a8.pdfticker: ETL8268AU
commentary_block: Array
factsheet_url:
https://www.artesianinvest.com/australian-corporate-bond-fund
asset_class: Fixed Income
asset_category: Bonds - Australia
peer_benchmark: Fixed Income - Bonds - Australia Index
broad_market_index: Australian Bond Composite 0-10Y Index
structure: Managed Fund