September, 2023
Performance for the month of September was +0.2%, for the quarter the Fund returned 1.5%.
Performance for every month this quarter was within the normal range of expected short-term performance variability.
Based on the Fund’s 2% p.a. volatility target, monthly performance is expected to remain in a range of - 1.0% to +1.3% about 95% of the time and be outside this range about 5% of the time. About 68% of the time, we expect monthly performance in a tighter band of -0.4% to +0.7%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-11.pdfAugust, 2023
Fund performance for the month of August was +0.5% (after fees).
The Fund's relative value (RV) strategies delivered positive returns, with positions in bonds versus derivatives, particularly in the US market, and options positions in the EUR market where volatility increased contributing to returns. The performance outcome is within the expected monthly performance range for the Fund’s 2% volatility target and the Fund continues to deliver on its role as a long-term strategic portfolio defensive risk diversifier with low correlation to both the fixed income and equity market performance. From a total return perspective performance is also benefitting from the higher cash rates which is at a 10-year high. Performance attribution summarises returns into key risk factors: RV micro curve, capturing performance related to interest rate curve movements; Bond versus derivative, reflecting risk factors tied to government bond pricing versus interest rate derivatives; and RV option positions, utilised for both RV and portfolio risk management through long volatility exposures.
Bond yields in core markets continue to move higher reaching decade plus highs, while equity markets declined. In the US, 30-year government bond yields hit a 15-year high, and 2-year and 5-year note auctions saw yields at pre-financial crisis levels. The UK experienced a similar trend, with 2-year and 10-year yields also reaching 15-year highs, in part reflecting market expectations of further interest rate hikes. In Australia, the yield to maturity on the Ausbond composite bond index reached levels not seen since 2012, peaking at 4.4% mid-month. Factors contributing to higher yields include increasing government and corporate bond supply, sticky core inflation, resilient economic growth, and a shift in Japanese investor preferences towards domestic bonds due to the relaxation of yield curve controls in Japan. This has made the buying of domestic bonds more attractive to Japanese investors and resulted in funds being repatriated back to Japan (e.g., selling UST buying JGBs). This is creating a large opportunity set for the Fund to invest in from the RV perspective.
The theme from most central banks is a similar one – allow more time to pass to determine the impacts on economies of the significant rate rises already delivered.
Elevated inflation remains a concern, and the possibility of further rate hikes cannot be ruled out. It was a quiet month for central bank meetings with the Bank of England the only major central bank to tighten rates. The outlook for the Chinese economy remains uncertain due to ongoing stress in the property market.
In Australia, inflation and wage data will likely be the key economic releases closely watched with the cash rate expected to remain high for some time as inflation is only expected to back at top of the target band by the end of 2025. The RBA left rates unchanged at its August and early September meetings. The market is pricing a relatively steady cash rate for the next 12 months.
We anticipate higher volatility levels due to unanchored interest rate curves, which are no longer constrained by zero rates or quantitative easing. Central banks, previously suppressors of volatility, now contribute to its amplification through quantitative tightening. Increased government bond issuance, particularly in Europe and the UK, adds to price volatility. Under this regime fixed interest is likely to have a more variable correlation to equities with the composition of fixed interest allocations becoming important. In this environment, we expect fertile relative value (RV) opportunities, with Bond RV in Europe and the UK showing promise. Micro curve positions across various markets are also positive as yield curve shapes adjust and flows create anomalies. The Fund's structurally long volatility positions with the favourable asymmetric payoff profile should also provide significant upside potential against modest downside risk in this environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-10.pdfJuly, 2023
Fund performance for the month of July was +0.9%.
July was a relatively quieter month for bonds markets, while risk assets continued to rally. Both US and Australian shares rose strongly, with a 3% increase. Year-to-date the S&P500 is up 19.5%. These gains were largely driven by softer-than-expected inflation data in the US and Australia, which led to the belief that the need for further rate hikes might be reduced. Consequently, the consensus macro narrative now revolves around the idea that rate hikes are nearing completion, and the risk of a recession has been averted. The risk to this ‘goldilocks consensus’ scenario is that central banks over tighten and then need to cut quicker as economies weaken.
The U.S. Federal Reserve indicated that it no longer expects a recession, and with slowing inflation, steady unemployment, GDP growth and consumer spending encourage investors that a soft landing was possible. In the bond market, 10-year Australian government bonds ended the month slightly higher at 4.06% and remained within the range observed since mid-last year (3.3%- 4.1%). In contrast, US 10-year yields increased 16bpts to 3.97%, nearing a 15-year high. The US Treasury is planning to issue more than USD 1 trillion of bonds and bills in the coming three months, while the supply of government bonds in the UK and Europe is also expected to increase dramatically in the near term. This situation is exasperated in the United Kingdom where the Bank of England is actively scaling back the size of its Gilt portfolio (UK government bonds).
The Federal Open Market Committee (FOMC) and European Central Bank (ECB) both raised rates by 25 basis points despite the improving outlook for inflation, the market is divided on whether there will a need for further rate increases. Any future rate increases will be driven by economic data, as the Fed and ECB closely monitor inflation to ensure it stays on track to reach their targets. The Bank of England (BOE) did not meet in July, but it is expected to increase rates at the early August meeting.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-9.pdfJune, 2023
Fund performance for the month of June was +0.15% (after fees).
In a short span of time, markets have made significant progress. Risk assets performed well in June, with the ASX200 index gaining 1.6%. This surge led many equity indices to reach their highest levels in over a year, with the ASX200 up 9.7%. Volatility measures continued to decrease, reaching levels similar to those before the COVID-19 pandemic. This recovery is remarkable, especially considering the pessimism experienced in Q1 when concerns about US bank failures and an impending recession in major economies prevailed. The recent optimism is backed by the resilience shown in economic data during Q2, particularly in the US.
Meanwhile, the aggressive rate hike cycle is set to stay higher for longer as inflation continues to remain stubbornly high. Apart from the Bank of Japan, all major central banks either increased rates in June or strongly indicated their intention to do so in the coming months. The US Federal Reserve decided to pause its tightening cycle after implementing a cumulative 500 basis points of rate increases. Federal Reserve Chair Powell acknowledged the extensive ground covered so far but pointed out that the full impact of these tightening measures is yet to be fully realised. He also projected two more quarter percentage point increases may be required before the end of the year. The minutes from the Federal Open Market Committee (FOMC) stressed that inflation levels remain elevated. In contrast, the Reserve Bank of New Zealand (RBNZ) signalled that it is likely to have completed its tightening cycle after raising the cash rate to its highest level in 14 years, reaching 5.5%.
In Australia, the labour market showed strength with a decrease in unemployment rate, robust employment growth, and record-high participation rates. The RBA surprised the market with a rate hike, acknowledging the increase in upside risks to the inflation outlook. The RBA emphasised the importance of improved productivity to prevent wages from becoming inflationary. It also hinted at the possibility of further monetary policy tightening to ensure inflation returns to the target range within a reasonable timeframe. Market economists are predicting an additional 2 to 3 rate hikes, which would bring the terminal rate to a range of 4.60% to 4.85%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-8.pdfMay, 2023
Performance for the month of May was -0.17%.
Market sentiment was influenced by ongoing negotiations regarding the US debt ceiling, which had a more pronounced impact in the latter half of the month. Consequently, global bond yields experienced an upward pressure throughout the month. By the end of the month, an initial agreement on the US debt ceiling was reached, although it still requires progression through the House rules committee, the House of Representatives, and the Senate for approval. This development brought about a slightly more positive outlook, resulting in longer-term yields declining marginally towards the end of the month with softer CPI data in Europe and weaker China PMI data also contributing. Once the debt ceiling is raised, it is anticipated that the US Treasury will issue a substantial amount of bills, totalling $1.2+ trillion, by the end of the year to replenish its cash balance. European Central Bank (ECB), Bank of England (BOE), and Reserve Bank of New Zealand (RBNZ) all implemented 25 basis point rate hikes. The level of overall macro uncertainty remains high and bond markets continue to swing dramatically between divergent states of the world, from recession and rate cuts to high inflation and higher rates for longer. The move higher in yields has bond market indices delivering negative returns for the month.
Overall, bond yields exhibited a broader range of fluctuations in May compared to April, but remained within the boundaries observed in March (both US Treasury and Australian 10-year yields fluctuated within a 56 basis point range, while Australian 3-year yields experienced a wider 69 basis point range). Initially, yields moved lower during the month as concerns eased regarding the US regional bank sector. However, economic data releases from mid-month onwards did not support further decreases in rates, compounded by concerns surrounding the debt ceiling. Examples of yield moves include US Treasury 10-year yields increasing by 22 basis points, to close at 3.65%, and US Treasury 2-year yields concluding the month with a 39 basis point increase, settling at 4.40%. Australian 3-year yields increased by 37 basis points, closing at 3.37%, while Australian 10-year yields rose by 27 basis points, closing at 3.60%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-7.pdfApril, 2023
Performance for the month of April was -0.46%.
April was less eventful for markets following the extreme moves in March with volatility easing although by month end the First Republic Bank in the US was taken over by the Federal Deposit Insurance Corporation and then most of its assets sold to JPMorgan Chase, this was the third major bank failure in the U.S. in less than two months and is likely to keep US regional banks in the headlines for the month ahead. The RBA left the cash rate unchanged at 3.60% which was its first pause in rate increases since it started increasing rates in May 2022, delivering a cumulative increases of 3½ percentage points. The BoC also paused whist the RBNZ and Riksbank both increased rates. The US Fed and the ECB did not meet in April however both meet in the first week of May and both are expected to increase their cash rate.
Moves in rates markets were more restrained in April, for example in Australia 10y bond futures, 3.56%, traded in a 41bp range v 84bp in March, whilst 3years, 2.98%, traded in a 46bp range v 106bps in March. AUD swap spreads narrowed over the month and volatility declined in rates markets as did equity market volatility which closed at its lowest level for over a year.
There were two key domestic economic releases, inflation data, the headline annual inflation rate came in 7% y/y down from 7.8% y/y at the Dec quarter but above consensus forecasts and remains stubbornly high, the trimmed mean printed at 6.6%. The second was employment data which was stronger than forecast with the unemployment rate printing at 3.5%. In other markets US payrolls data was better than expected while UK inflation was higher than anticipated driven by rising food costs keeping the inflation rate above 10%.
Following the rate hike pause in April the RBA has surprised the markets on 2 May by again tightening rates by a further 0.25% to 3.85% sighting concern over services side inflation, a tight labour market and wages growth. Market participants are now looking for further increases over coming months as the RBA remains committed to return inflation to target which may mean the policy cycle could remain higher for longer.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-1-1.pdfMarch, 2023
Performance for the month of March was +3.4% (after fees).
March was eventful in markets. The collapse of SVB, forced merger between Credit Suisse and UBS and pressure on other banks was a major shock for investors. Volatility surged – most notably in interest rate markets and US regional and some European bank assets. While some calm returned by month-end, markets remained priced for a significantly lower path for rates, reflecting expectations that credit tightening will serve as a substitute for further rate hikes and that something else will break following the relentless rate hikes delivered over the last year. This is a big change from early in the month, when investors feared a higher-for-longer rate scenario, as inflation remains well above central bank comfort levels. (See our latest note for more detail on recent rates volatility).
The moves have been especially violent at the front end of the US curve. Of note:
• Measures of short-dated US rates volatility eclipsed 2008 highs, as the market moved from pricing nearly 100bp of Fed rate hikes to as much as 80bp of rate cuts, despite a Fed hike in the month.
• The UST 2y yield tracked a 160bp range, registered one of the biggest ever 3 day moves and the UST 2s10s curve steepened the most in a single day since the early 1980s.
• The ECB and BoE also hiked rates in March, yet these markets, along with others such as AUD and CAD, saw big falls in forward interest rate pricing.
The Fund’s RV strategy delivered outsized gains over the month, particularly in the USD market. The Fund is positioned across a large number of RV trades, a subset of which targets micro yield curve anomalies with futures contracts on short-dated US interest rates. The large movements in short-dated USD rates benefited these positions.
Gains were accelerated by the integration of options on US futures with less than one year to maturity, within yield curve RV strategies. The decision to buy options reflects a view on the RV attributes of the options themselves and the risk balancing benefits that come with blending options into RV strategies.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-6.pdfFebruary, 2023
Performance for the month of February was 1.22% (after fees).
After a strong start to the year for most asset classes, markets reversed course in February. Sovereign bonds, credit and equities delivered negative returns. The broad macro narrative abruptly shifted from disinflation and peak rates to a higher for longer view on rates following upside surprises to inflation, jobs and high frequency global growth data. Central banks have reinforced hawkish rhetoric. The subsequent sharp repricing higher of terminal policy rates has taken short term bond yields to new cycle highs, flattening yield curves.
Against this challenging market backdrop for conventional fixed income, the Fund’s RV strategy delivered positive performance in February. Elevated macro uncertainty over the path for interest rates is creating new RV opportunities for the Fund to target through increased micro distortions in the shapes of yield curves. We have recently added positions in interest rate swaps in the USD and EUR markets to target these mispricings. Bond supply/demand dynamics are also presenting new opportunities as markets adjust to lower central bank bond holdings and high issuance levels, particularly in the EUR and GBP markets.
The drivers of performance for the Fund are summarised by broad risk factors in the attribution table. These risk factors capture a large number of underlying trades across global interest rate markets and as such, there is no single position that explains performance. We outline a few themes impacting the attribution.
Bond vs Derivative exposures added value, led by gains in the AUD market. The Fund holds government and semi-government bonds across the curve, hedged with swaps and futures. For example, within the AUD market, the Fund benefited from outperformance in shorter maturity inflation linked bonds and 15-30y nominal government bonds relative to swaps.. Positions in 12-14y semi-government bonds also outperformed swaps. These are a relatively cheap sector within semi yield curves. Positions in the GBP market also added value, as a short in relatively expensive 30y Gilts underperformed an offsetting long position in swaps (the Fund is also positioned long in shorter maturities to capture relatively cheap Gilts). A small detraction came from long and short curve positions in long-dated French government bonds.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-5.pdfJanuary, 2023
Performance for the month of January was -1.5% (before fees).
The main drivers of the negative monthly return are interest rate option holdings amid falling volatility and shifts in yield curves, which adversely impacted other RV positions. The Fund holds options across major interest rate markets, underlying maturities and expiries. The broadbased fall in volatility over the month, to still elevated levels from a long-term perspective, reflects a positive shift in sentiment supported by:
- signs of a peak in US and European inflation;
- a collapse in European gas prices from the very high levels reached in late 2022; and
- the continued reopening of China’s economy.
Underlying the positive market narrative in January is significant two-sided uncertainty around the path for inflation and prospects of a recession in the coming year (indeed, market views on the longevity of the rate hike cycles have shifted again in early February). As such, interest rate volatility may not remain on a consistent downward path.
As RV investors, we do not seek to predict the macro drivers of volatility, but instead use options within our portfolio construction framework to balance risk over time. Options have played an especially important role in the portfolio through the extraordinary period of global market upheaval over the last year, adding to performance and reducing potential performance volatility. The last year has been a period of extraordinary stress in RV pricing relationships, which ultimately improves the future opportunity set and return potential for the strategy (RV pricing stress is discussed in more detail in this note).
Through our long-term experience of managing RV Funds, the approach of holding a diverse portfolio of RV trades alongside option positions has proven to be reliable over time.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-4.pdfDecember, 2022
Performance for the month of December was +0.47% (after fees).
December was a challenging month to end one of the toughest years on record for markets. Equities fell and bond yields lifted sharply as central banks continued to tighten policy to fight high inflation. While the incremental pace of rate hikes slowed relative to prior months – 50bp hikes for large developed markets and 25bp for the RBA – central bank commentary and forecasts (especially from the ECB) still pointed to significantly tighter policy in 2023. European, UK and Australian markets underperformed US Treasuries.
The bond sell-off gathered momentum after the BoJ surprised markets by widening their target range for 10y JGB yield moves from 0.25% to 0.5%. While the BoJ cited operational reasons for the change, markets are speculating about further policy shifts. Also, the higher upper band for the target further disincentivises offshore sovereign bond allocations from Japanese investors in an environment where FX-hedge costs are already prohibitively high.
The Fund is positioned to target relative value opportunities across global interest rate markets, while minimising exposure to duration (for a discussion on key rates market themes and the implications for RV, see our 2023 key themes note). Since there are a large number of small sized trades in the portfolio, we summarise our performance attribution with reference to broad risk factor exposures. Over the month, exposure to RV yield curve and option risk factors were flat to positive contributors, while bond vs derivative exposures were a detraction.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-3.pdfNovember, 2022
Performance for the month of November was -1.87% (after fees).
The main driver of the negative return in November is a reversal of outsized gains in the prior few months from the Fund’s structural long position in interest rate options.
It’s important to note the high starting point for option valuations. Global interest rate market volatility had reached historically high levels prior to November. Markets were braced for a continuation of one of the most aggressive and synchronised rate hike cycles on record. However, through November, markets quickly shifted course. Bond yields fell sharply amid signs that inflation momentum is slowing. Despite still high macro uncertainty, in the current context this repricing compressed the perceived distribution of future rate outcomes causing option-implied volatility to fall sharply. The decline in volatility was among the largest one month falls in a decade or longer (depending on measure).
The Fund was impacted by the fall in implied volatility through option holdings (-1.4%). This impact was spread across multiple markets but was most notable in EUR and GBP, where the decline in volatility was most pronounced.
Option positions serve an important portfolio risk balancing role and tend to provide protection in stressed market environments, which can adversely impact other RV positions. While this portfolio construction approach works reliably over the medium term, there are infrequent short-term periods such as November where options decline significantly in value and are not offset by gains in other RV positions.
Within non-option risk factors, there are a large number of underlying positions and mixed performance between markets over the month. Overall, these exposures were modest detractors, summarised as RV curve (-0.4%) and bond vs derivative (-0.2%) in the portfolio attribution. For example, RV positions in the front part of the CAD curve - targeting the relative expensiveness of 3-4y rates - were a detraction. In terms of bond vs derivative exposures, long positions in 10-30y AUD government bonds vs swaps detracted this month, after driving positive performance in the prior months. These spreads had widened well beyond supply/demand factors due to positioning and liquidity and this impact faded in November.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-2.pdfOctober, 2022
Performance for the month of October was +1.23% (after fees)
The market backdrop in October was one of continued underperformance in global fixed income. However, risk sentiment improved amid hopes central banks may soon pivot away from aggressive policy tightening, alongside falls in key European energy prices and a stabilisation in the UK market following a change of government. Equities bounced strongly but didn’t fully recover the steep losses from September.
Global rates market hopes for a central bank pivot were supported early in the month by the RBA increasing the cash rate by only 25bp, later in the month by a more circumspect outlook from the BoC and media speculation of a change in Fed policy trajectory. However, these signals were broadly offset by US, UK and Euro Area inflation rates hitting new highs, the Fed and ECB still delivering 75bp hikes and talking up their inflation-fighting resolve. Consequently, for global fixed income markets, hopes of a policy pivot failed to translate into improved returns for most conventional long-only portfolios. The global aggregate and global government indices still finished the month in the red, leaving year-to-date losses in excess of 20%. Australian fixed income was a notable exception in delivering positive monthly returns at the index level following a moderation in the RBA’s hawkish policy stance. Bond yields touched new highs for the cycle and in the case of the US 2y yield, a new high since 2007. However, October also saw some consolidation near these levels, marking a slowing in the pace of the broader trend higher in yield.
Ongoing high macro uncertainty saw USD and EUR volatility remain elevated, while GBP volatility declined sharply from the extreme highs of late September. The Fund’s option (+0.2%) positions – held to capture RV and balance portfolio risk – still made a positive contribution.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF-1.pdfSeptember, 2022
Performance for the month of September was +1.83% (after fees).
An already tough year for markets worsened in September. The scale of drawdowns and level of volatility is the highest in decades in some asset classes. The Bloomberg Global Government Bond Index fell another 5% in September, taking year-to-date declines to 20% as major market yields hit the highest levels in a decade or longer. Global equity markets have experienced a similar sized correction, after registering 5-10% falls over the month. The global macro backdrop remains very challenging, as central banks aggressively tighten policy to fight historically high inflation into a slowing global economy. The Fed, ECB, BoE, BoC, RBA and other central banks all delivered outsized rate hikes in September. Further fuelling negative sentiment has been a crisis of market confidence in UK government policy, a continued major disruption to European energy supply and negative geopolitical headlines. Meanwhile, the extraordinary strength of the USD is causing headaches for other global central banks
The UK has been a major driver of the September turmoil in global markets. GBP assets experienced EMlike volatility in the wake of the UK Government’s budget update, which dramatically expanded fiscal policy at a time of high inflation and BoE quantitative tightening. Gilt yields experienced their largest ever daily and weekly increases in 30 years and the GBP fell sharply as markets questioned the credibility of the fiscal policy outlook. Subsequent BoE intervention and government statements aimed at easing market concerns saw only a very small retracement in yields late in the month (see this note for more detail on the UK market turmoil).
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/ARDE-FR-ROF.pdfAugust, 2022
Performance for the month of August was +0.63% (after fees).
Major global equity, sovereign bond and credit benchmarks ended August in the red. The broad recovery in markets from July initially carried over into August - boosted by a lower-than-expected US CPI report. However, sentiment reversed sharply around the middle of the month. This turn in fortunes was accelerated by hawkish remarks from Fed Chair Powell in his annual Jackson Hole speech. The Fed is telling markets to expect higher rates for longer. They were quickly joined by ECB officials in talking up a more aggressive path for rate hikes, amid record high inflation of 9.1% y/y for the Euro Area and a 25% monthly rise in natural gas futures driving further stagflation concerns.
Against this turbulent global market backdrop, the Fund’s RV strategy delivered positive returns in August. Performance remains uncorrelated with conventional duration and credit heavy fixed income benchmarks. The Bloomberg Global Aggregate Bond Index fell 4% over the month to be down 16% year-to-date.
The Fund is benefiting directly from higher interest rate market volatility through option strategies (+0.4%). Interest rate option markets offer RV opportunities as well as providing risk balance for other parts of the portfolio. A common strategy implemented by the Fund is a long interest rate swaption straddle - holding a receiver and payer swaption at the same strike. In effect, the Fund is able to benefit from large interest rate movements, irrespective of direction. These positions have limited downside risk and larger upside potential. The EUR and GBP option markets were contributors to performance through August, as these markets were buffeted by especially hawkish central bank policy expectations amid steep rises in inflation and energy prices.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-18.pdfJuly, 2022
Performance for the month of July was -2.1% (after fees).
The July monthly return is outside the range of normal expected performance variability for this Fund, which targets 2% annual performance volatility. The outsized magnitude of the negative return was driven by timing effects on some trades, which subsequently reversed in early August (further detail below. We are confident that both the structural nature of RV and the Fund’s approach to portfolio construction will deliver strong riskadjusted returns over the medium term. For the last decade this Fund has a track record of delivering returns consistent with its objectives over a recommended horizon of at least two years.
The market backdrop was one of abrupt reversal. At the headline asset level, markets rebounded in July after an historically poor first half of the year. Global government bonds posted their first decent monthly gain for 2022. Equity markets and credit spreads similarly outperformed. Underlying this reversal is the expectation that central banks will pivot from aggressive monetary policy tightening because of greater concern over softening growth, and a belief that the highest rate of inflation in decades is close to peaking.
Despite the speed of the narrative shift in markets and still high degree of underlying macro uncertainty, market pricing for central bank policy shifted to a more constrained forward rate path, compressing the perceived distribution of future rate outcomes. Measures of implied volatility from interest rate options fell sharply from the multi-year high levels reached in June. As a result, the Fund’s structural long exposure to interest rate volatility through options (-0.7%) incurred losses, after material outperformance through Q2.
It is not unusual for interest rate volatility to abruptly reverse course as macro narratives shift. It is less typical for volatility to fall sharply at the same time as other relative value pricing relationships remain stressed. The combination of these developments led to negative performance in July.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-8.pdfJune, 2022
Performance for the month of June was +0.84% (after fees).
Global bond markets remain under pressure and in June experienced large intra-month volatility. Early in the month, inflation data continued to exceed expectations, prompting central banks to step up aggressive monetary policy tightening. The Fed hiked 75bp and the Reserve Bank of Australia (RBA) hiked 50bp, while the European Central Bank (ECB) flagged rate hikes at upcoming meetings. Bond yields surged to new multi-year highs into the middle of the month, while risk assets fell sharply. That theme quickly gave way to recession fears and bonds subsequently rallied strongly, albeit still leaving yields higher than end of May levels and major bond indices with negative monthly returns. Against this turbulent global market backdrop, the Fund’s RV strategy delivered positive returns. Performance remains uncorrelated with conventional duration and credit heavy fixed income benchmarks.
In June, the Fund benefited directly from high volatility in global bond markets through exposure to interest rate options (+0.7%) and associated hedging activity, reflected in the RV rates (+0.2%) component of performance attribution. Options positions are primarily held across USD, AUD, EUR and GBP markets. Interest rate option markets offer RV opportunities as well as providing risk balance for other parts of the portfolio. A common option strategy implemented by the Fund is a long interest rate swaption straddle - holding a receiver and payer swaption at the same strike. In effect, the Fund is able to benefit from large interest rate movements, irrespective of direction. These positions have limited downside risk and larger upside potential.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-17.pdfMay, 2022
Performance for the month of May was -0.25% (after fees). The broader market backdrop remains challenging for most asset classes. After heavy losses in bond benchmarks and risk assets over prior months, there was finally some consolidation in May. US Treasuries made modest gains, but other sovereign bond markets such as Europe and Australia underperformed. Global yield curves generally steepened. However, there were sizable swings in risk sentiment intramonth. Macro uncertainty remains very high amid tension between ongoing inflation pressures, rapid tightening of monetary policy and rising global growth concerns.
The Fund’s pure RV strategy continues to navigate this turbulent environment with considerably lower performance volatility than duration-heavy bond indices.
After delivering outsized positive returns over the last few months, options (-0.5%) were the largest detractor from performance in May. The consolidation in broader bond markets, after an historically large sell-off, led to a decline in implied volatility from elevated levels, which adversely impacted options held by the fund over this period. This detraction was spread across USD, EUR and AUD markets.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-7.pdfApril, 2022
Performance for the month of April was +1.00% (after fees).
The historically poor performance of global government bond markets continued through April, despite weaker equities. The April moves build on the big first-quarter sell-off in bonds, leading to double-digit year to-date losses for duration-heavy benchmarks. The combination of high inflation, the aggressive central bank policy tightening and global growth concerns are causing significant upheaval across asset classes.
Against this challenging market backdrop, the Fund’s RV strategy delivered positive returns. We outline the performance drivers with reference to our broad risk-factor level performance attribution.
Significant benefits continue to flow from exposure to interest rate options (+0.4%) and associated hedging activity, reflected in the RV rates (+0.4%) component of the performance attribution. These positions benefit directly from ongoing elevated volatility in global interest rate markets and reinforce the defensive alternative attributes of pure RV at a time of significant upheaval in financial markets. Across markets, USD (+0.2%) and AUD (+0.10%) option positions added the most value. Over the last month, there has been a notable pickup in volatility at the long end of the US curve, which has significant global cross-asset implications.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-16.pdfMarch, 2022
Performance for the month of March was +0.46% (after fees).
The backdrop is one of severe pressure in global bond markets, as central banks react to the relentless rise in inflation. Significant uncertainty persists over the path for interest rates, underpinning continued elevated volatility in bonds, even as equities staged a turnaround in the month. Many conventional bond indices finished March with monthly losses of 3-4% and quarterly losses of 5-6%, which for some benchmarks is the worst quarterly performance in decades.
This turbulence in global bond markets benefited the Fund’s positions in interest rate options (+0.5%) and associated hedging activity to manage the duration impact of options on the portfolio, reflected in the RV rates (+0.3%) attribution category. These positions are implemented to capture relative value opportunities within segments of global interest rate option markets (such as targeting comparable implied vs realised volatility differences) and to support portfolio risk balance. Contributions from options were spread across a few markets - as the increase in global rates volatility was broadly based – notably in USD (+0.2%), EUR (+0.2%) and AUD (+0.1%). Within most markets, shorter-term rates volatility increased relative to longerterm volatility, reflecting the large repricing of policy rate expectations.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-15.pdfFebruary, 2022
Performance for the month of February was -0.97% (after fees).
For context, a negative single month return of this magnitude is within the range of expected – but infrequent – return outcomes, based on the portfolio’s 2% volatility target. We expect monthly performance to fluctuate in a range of -0.4% to +0.7% most of the time (around 68% of months), and in a wider band out to -1.0% to +1.3% some of the time (around 27% of months). A negative return in the range of -0.4% to -1.0% is expected around 13% of the time.
The largest impact on performance over the last month was a detraction from RV curve exposures (-0.9%). This attribution category reflects the cumulative impact of a large number of positions implemented to capture changes in the shapes of yield curves. As our investment approach is duration neutral, the level shift in rates / bond yields is not a driver of performance. Rather, the large shift in the relative volatilities of different parts of interest rate curves in February led to dramatic changes in curve shape.
These positions are spread across global rates markets and over the last month, the largest source of detraction came from curve exposures in the EUR market (-0.5%). Of particular relevance in February were positions in EUR targeting a steepening between the 10y and 30y sectors of the curve through forward swaps and for relative performance in 1-2y rates vs nearby maturities.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-14.pdfJanuary, 2022
Performance for the month of January was -0.24% (net of fees), which is within the range of expected performance variability (see the Understanding Performance section below for details).
Returns are driven by the interaction between a large number of small sized relative value positions, rather than a few key trades or macro themes. The attribution of returns for this Fund reflects exposure to broad interest rate market RV risk factors.
The following themes impacted these risk factor level exposures in January:
- Curve positions were a modest overall detractor from performance. The Fund holds a series of long and short positions across major interest rate markets, targeting constrained curve relationships. A notable source of detraction were curve positions in the EUR market - mostly in short end and ultralong maturities - which were not completely offset by gains in intermediate sectors. Positions in other markets were mixed.
- RV Bond vs Derivative exposures added value in January. These positions target relative pricing differences between bonds and derivatives and are mostly driven by market-specific changes in the balance of supply and demand. For example, some of the Fund’s EUR and AUD bonds outperformed offsetting duration hedges in swaps and futures.
- Options exposures added to performance, reflecting the increase in rates market volatility over the month, with USD positions benefiting the most. These positions reflect RV considerations and are intended to provide the portfolio with risk balance.
- The Inflation Beta component of the portfolio was a small positive contributor but experienced significant intra-month volatility. The prospect of more aggressive global central bank tightening initially weighed on global breakeven rates. However, late in the month, Australian breakeven rates outperformed following a higher than expected Q4 CPI report and month-end index extension demand.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-13.pdfDecember, 2021
Performance for the month of December was +0.42% (net of fees), which is within the range of expected performance variability (see the Understanding Performance section below for details).The performance attribution figures refer to risk-factor level exposure for the Fund overall, rather than individual trades.
The following themes impacting risk factor exposures were notable in December:
- The Fund benefited from Relative Value (RV) Bond vs Derivative exposures, particularly across long bond positions in the USD market, hedged with futures and swaps.
- Options exposures were a modest drag on performance, which was mostly a reflection of USD implied rates volatility easing from the elevated levels reached at the end of November.
- The Inflation Beta component of the portfolio – implemented in AUD inflation-linked bonds - also made a positive contribution, as market inflation expectations lifted over the month amid stronger than expected global CPI data and persistent supply chain pressures.
The Fund’s performance is not driven by a few key trades or broader macro themes, so we focus the commentary below on examples of RV-specific themes that the Fund is positioning around. The performance of many individual trades underlying these themes and a large number of other themes, has contributed to the Fund’s performance this month
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-11.pdfNovember, 2021
Performance for the month of November was +0.08% (net of fees), which is within the range of expected performance variability (see the Understanding Performance section below for details).
The performance attribution refers to risk-factor level exposure for the Fund overall, rather than individual trades. The following themes impacting risk factor exposures were notable in November:
- The Fund benefited from Options and related RV Rates exposures as interest rate markets were moderately volatile over the month. Following a large increase in October, implied volatility in options with shorter underlying maturities remained elevated as central bank policy uncertainty persisted. Further out the curve, longer term rates volatility picked up a bit as markets grappled with uncertainty over the Omicron COVID variant. These moves, however, were not extreme by historical standards. The Fund buys options based on RV considerations and to provide risk balance to the portfolio.
- RV Curve exposures were a modest detractor from performance. This exposure represents a large number of underlying trades – some were contributors in the month, while others were detractors. A general theme is that interest rate markets recovered somewhat from the extreme disfunction of late October. However, many RV relationships targeted by the Fund across yield curves remained distorted. Over short-term periods, there is substantial noise associated with the behaviour of these constrained RV relationships.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-6.pdfOctober, 2021
Performance for the month of October was -0.69% (net of fees), which is modestly outside the range of expected performance variability (see the Understanding Performance section below for details). The magnitude of negative return experienced this month is still consistent with the Fund’s 2% p.a. volatility target and, as we explain below, is a strong validation of the Fund’s risk management process, which is intended to maintain low performance volatility, even through periods of extreme market stress. Relative value (RV) interest rate ‘Curve’ and ‘Bond vs Derivative’ exposures detracted from performance this month, while the Fund’s exposures to ‘Options’ and ‘Inflation Beta’ were positive contributors. Some specific trade examples are provided further below.
Performance attribution to ‘Curve’ captures performance stemming from the Fund’s exposure to changes in the shapes of interest rate curves, while attribution to ‘Bond vs Derivative’ captures performance stemming from exposure to changes in the relative pricing relationships between government bonds and closely related interest rate derivatives.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-10.pdfSeptember, 2021
Performance for the month of September was -0.5% (net of fees), which is marginally outside the range of ‘expected performance variability’.
The relative value (RV) interest rate ‘Curve’ related exposures accounted for substantially all the negative return this month. This attribution bucket captures performance stemming from the Fund’s exposure to changes in the shapes of interest rate curves. These exposures are driven by trades that exploit pricing inconsistencies between different points on interest rate curves by taking ‘long’ positions in some points vs. ‘short’ positions in others, with overall trade packages managed to remain duration neutral. It is normal for any of the Fund’s individual trades to experience short-term losses because we cannot precisely time the optimal entry point for every trade, nor can we control the timing of when a trade will play out as expected.
While such timing effects occur all the time, their impact on total portfolio performance is usually smoothed out via portfolio diversification. However, sometimes many trades happen to be temporarily negative at the same time, while others take longer than average to play out, resulting in a larger negative performance at the total portfolio level, which is what happened with the Fund’s ‘Curve’ related exposures this month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-5.pdfAugust, 2021
As at 31st August, the Fund’s rolling 2 year return was 3.3% per annum (net of fees), which is tracking ahead of target. (return target = cash / CPI + 2% before fees). Performance is evaluated over rolling 2 year periods for consistency with the recommend minimum investment horizon of 2 years. Performance for the month of August was -0.27% (net of fees), which is within the range of ‘expected performance variability’.
Over short-term horizons it is entirely expected that portfolio performance will fluctuate in a range around the expected long-term investment outcome, including periods of negative returns. We use the concept of ‘expected performance variability’ to objectively define a range of short-term performance fluctuation that is consistent with the investment strategy operating as expected. This range is based on the Fund’s volatility target of 2% p.a. and translates to an expectation for monthly performance to commonly fluctuate in a range of -0.4% to +0.7%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-9.pdfJuly, 2021
The performance of major asset classes was mixed in July. Investor focus was split between still strong data in major economies, solid US earnings, supportive central banks, versus concerns over a peak in growth momentum alongside a rise in Covid cases. Despite a few hiccups intramonth, US and European equities still posted new highs and a sixth consecutive monthly gain (S&P 500 +2.3% and Stoxx 600 +2.1%). In contrast, it was a weak month for many Asian markets - the Hang Seng (-9.9%) and Nikkei (- 5.2%) finished July significantly lower. Investor sentiment in Asia centred on regulation, softening Chinese data and increasing Covid cases. Commodity prices still managed a broad rally – the Bloomberg Commodity Index adding 1.8% to reach a six year high.
The increasing uncertainty over global growth, the path for Covid and other forces supported sovereign bonds in July (see below for more detail). The Global Aggregate and US Treasury indices added 1.3-1.4%. Major developed market 10y yields fell 15-35bp. The US 10y yield finished the month at 1.22% - the lowest level since February, marking a full reversal of the “reflation” theme that had gripped markets earlier in the year.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-8.pdfJune, 2021
The portfolio return in June was negative.
Performance is driven by strategies that target specific ‘relative value’ (RV) mispricing between closely related fixed income securities. These strategies are implemented in a way that isolates the RV mispricing from broader market movements, maintaining minimal interest rate duration exposure and excluding all credit investments. For this reason, the performance of RV portfolios, over time, has a low correlation to broader bond market and macro themes.
The portfolio is constructed with many modestly sized and diverse RV strategies that collectively contribute to overall performance. We outline performance based on our broad attribution categories. As there are a large number of individual positions, the commentary below focuses on a small subset of noteworthy RV themes and examples of positions.
The performance of major asset classes was generally positive in June. Global equities posted solid gains, taking the MSCI World (+1.4%) and S&P 500 (+2.2%) to new highs. The macro backdrop remained broadly supportive of risk assets. Global growth indicators suggest continued positive momentum, which is set to become less US-centric in H2 2021. There has been continued progress in Covid vaccinations among developed economies, although risks remain from the delta Covid variant.
Fixed income performance was mostly positive. While the Global Aggregate (-0.9%) index finished the month down, US Treasury (+0.6%), Australian government (+0.8%) and Australian composite (+0.7%) indices posted gains. Broad US and European Investment grade credit indices finished the month tighter. Yield curves flattened notably as expectations for policy tightening were pulled forward after the June Federal Reserve meeting. However, longer term rates expectations and inflation pricing actually fell over the month, supporting longer duration bond performance (more details below). Well contained long term bond yields are providing a tail wind for risk assets.
Elsewhere, oil prices outperformed most other assets (Brent +8.4%, WTI +10.8%), on the favourable growth outlook and contained supply expectations. The USD index outperformed (+2.9%) following hawkish Fed comments
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-7.pdfMay, 2021
Most markets broadly tracked sideways to slightly stronger in May. Equity indices (ex-Japan) finished modestly positive – the MSCI world closed 1.3% higher and the S&P 500 +0.6% higher. Global bond indices added moderate gains – the Bloomberg-Barclays Global Aggregate Index lifted 0.9%. The US 10y yield fell 3bp in May to 1.59%, holding within the 1.50-1.75% range that has held since mid-March. EUR rates underperformed intra-month before finishing little changed. Elsewhere, commodity prices continued their impressive ascent, but at a slower pace than in April (Bloomberg Commodity Index +2.7%). In FX, the USD continued its trend lower in broad terms (DXY -1.6%), while the GBP topped the G10 leader board (+2.6%).
In May there were a few brief challenges to the prevailing bullish narrative in the form of volatile economic data and some underlying concerns about central bank support. Of note, nominal bonds and stocks briefly underperformed amid a large upside surprise in the US CPI report (for April). CPI lifted 0.8% m/m and 0.9% m/m in headline and core terms, respectively. That core increase is the fastest monthly rebound since 1981. The y/y rise in the headline measure of 4.3% is the highest since 2008 and the 3.0% y/y rise in the core measure is the highest since 1996. The data well exceeded consensus expectations and the headline increase was higher than the forecast of all economists surveyed by Bloomberg.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-6.pdfApril, 2021
April was a relatively good month for most major asset classes. Investor sentiment remained buoyant and confidence strong in the unfolding global economic recovery amid very strong data. Many equity indices rallied to new all-time highs (S&P 500 +5.2%), while growth-sensitive commodity prices surged – copper jumped 12.1% m/m (the broader Bloomberg Commodity Index lifted 8.3%). Fixed income performance was mixed, but the asset class overall enjoyed much better support than in Q1. The Bloomberg-Barclays Global Aggregate Index gained 1.3% - the first monthly increase in 2021. The US Treasury Index gained 0.8% - the first monthly increase since November 2020 (more details on the underlying drivers of this rally in the following section). The benchmark US 10y yield fell 9bp to 1.63%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-4.pdfMarch, 2021
In March, government bonds generally remained under pressure, although price action was choppy and there were notable cross market differences. The US bond market underperformed significantly – the 10y yield finished the month 34bp higher at 1.74%. The 10y yields in Germany and the UK ended the month near flat and Australian 10y yields finished 13bp lower than the spike higher seen over the last few days of February.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-4.pdfFebruary, 2021
The Real Outcome Fund delivered positive returns in February.
The market backdrop was one of extreme volatility in global rates markets, unseen since the height of the Covid panic in March 2020. The sharply higher yields and steeper curves delivered significant losses to traditional long-only government bond investments, particularly Australian benchmarks. In this negative environment for bonds, the relative value strategies held by the portfolio delivered positive overall returns. The portfolio is constructed to be as well balanced as is practically possible to protect against abrupt changes in market conditions. Volatility strategies delivered large gains, offsetting a drag in performance from the RV rates attribution category. Other types of RV strategies experienced modest overall gains and losses. Volatility
The portfolio is positioned long volatility through interest rate options. These trades are implemented based on RV considerations such as the cheapness of implied relative to realised volatility and to provide risk balance to the portfolio. The value of long option strategies increased as interest rate volatility jumped dramatically, particularly over the second half of February.
RV Rates The portfolio holds a wide range of relative value long and short positions across multiple markets in bonds, swaps, futures and options. These positions require constant rebalancing as market conditions change. This rebalancing of positions led to longer positioning in some sectors of curves than offsetting short positions, which underperformed as yields lifted. Long AUD positions in the 4-5y and 10-20y part of the curve underperformed short positions in the 7-10y part of the curve. Various net long positions across the NZD curve also underperformed. A partial offset to these positions were net short positions in USD, which benefited as yields lifted.
Ardea Real Outcome Fund RV attribution categories
RV Rates: The portfolio consists of hundreds of individual long / short bond and derivatives positions, each with their own interest rate duration exposure. These positions are designed to offset each other and are constantly rebalanced to minimise duration exposure, so that the portfolio is not overly exposed to general fluctuations in the level of market rates. RV Micro Curve: These RV strategies exploit pricing inconsistencies between different points on interest rate curves by taking a ‘long’ position in one point vs. a ‘short’ position in another, such that the overall trade has zero net interest rate duration. We focus specifically on curve points that are highly correlated with each other, which typically means they are close to each other.
Volatility: ARO’s portfolio is always positioned structurally ‘long volatility’, which is expressed via buying interest options. This means the portfolio benefits when the market pricing of interest rate volatility increases
RV Bond vs Derivative: These RV strategies exploit pricing inconsistencies between government bonds and closely related interest rate derivatives by taking a ‘long’ position in one vs. a ‘short’ position in the other, such that the overall trade is duration neutral.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-3.pdfJanuary, 2021
The reflation theme evident over the last few months received a boost in January after the Georgia senate runoff results handed senate control to the Democrats. The prospect of significantly higher fiscal spending and bond supply drove underperformance of US Treasuries, taking the 10y yield 17bp higher to 1.07% over the month, a high since March 2020. Inflation-linked bonds outperformed again, sustaining near-record low levels of real yields and maintaining the upward trend in breakeven inflation rates. Other bond markets soldoff in January in sympathy with the US, of note: 10y Bund yield +5bp to -0.57%, 10y ACGB yield +16bp to 1.13%, 10y Gilt yield +13bp to 0.33%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-3.pdfDecember, 2020
In December, markets broadly continued down the positive risk and reflation path. Equities posted healthy monthly gains yet again (S&P 500 +3.7%, MSCI world +4.1%), sovereign bonds were mixed (US 10y yield +7bp, Bloomberg global treasuries index return +1.5%), credit spreads sustained tight ranges and the USD continued to fall (DXY -2.1%). These moves cap off an extraordinary year for markets, where a global pandemic drove one of the largest downturns in modern history, yet many asset prices rebounded sharply. Sovereign bonds also finished 2020 with solid gains, despite the weakness in some markets, such as US Treasuries, over the last month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1-1.pdfNovember, 2020
In November, investor focus switched from votes to vaccines, which powered equities to new highs – most major indices posted double-digit gains and some made new monthly records. In contrast, the USD index and gold underperformed notably. The pro-risk backdrop had only modestly bearish implications for government bonds.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-2.pdfOctober, 2020
Pro-growth and risk-on themes that dominated for most of the September quarter weakened in October. For example, the MSCI World equity index, having reach a new all-time high in early September, subsequently dropped 8% by the end of October. The proximate causes were the two themes that dominated over the month – the US election and a global resurgence in COVID cases. On the virus front, Europe led the way back into lockdown, while the US has so far been reluctant to reimpose wide scale lockdowns, despite also experiencing a spike in new COVID cases.
The portfolio’s return for the month was positive. Performance is driven by strategies that exploit specific ‘relative value’ (RV) mispricing between closely related fixed income securities. This is done in a way that isolates the RV mispricing from broader market movements, while maintaining minimal interest rate duration exposure and excluding all credit investments. Consequently, the portfolio’s performance is not driven by the macroeconomic factors or market movements that dominate conventional fixed income strategies and therefore exhibits minimal correlation to broader government bond, credit and equity markets. The portfolio is intentionally constructed with many modestly sized and diverse RV strategies that collectively contribute to overall portfolio performance. As the portfolio contains hundreds of individual positions, the 11 commentary below focuses on just a few of the more noteworthy RV themes that contributed to performance over the period.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AROF_FR-1.pdfSeptember, 2020
The portfolio’s return for the month was positive.
Performance is driven by strategies that exploit specific ‘relative value’ (RV) mispricing between closely related fixed income securities. This is done in a way that isolates the RV mispricing from broader market movements, while maintaining minimal interest rate duration exposure and excluding all credit investments. Consequently, the portfolio’s performance is not driven by the macroeconomic factors or market movements that dominate conventional fixed income strategies and therefore exhibits minimal correlation to broader government bond, credit and equity markets.
The portfolio is intentionally constructed with many modestly sized and diverse RV strategies that collectively contribute to overall portfolio performance. As the portfolio contains hundreds of individual positions, the commentary below focuses on just a few of the more noteworthy RV themes that contributed to performance over the period. (Further detail on the Fund’s pure ‘relative value’ investment approach is available here.)
Noteworthy positive performance for the month came from the following strategy groups:
ticker: HOW0098AU
commentary_block: Array
factsheet_url:
https://www.fidante.com/-/media/Shared/Fidante/ARDE/AROF_FR.pdf?la=en
https://www.ardea.com.au/our-funds/ardea-real-outcome-fund/
under Monthly Commentary
release_schedule: Monthly
fund_features:
Ardea Real Outcome Fund is an attractive offering due to its seasoned team and well-structured risk-aware process. The strategy targets stable returns of 2% above inflation with low volatility over the medium term.
- The investment approach is based primarily on fundamental analysis with a focus on an accurate measurement and disciplined management of risk.
- The Fund primarily invests in high quality, liquid Australian and global government bonds, semi-government bonds, interest rate derivatives, and short term money market instruments. The Fund may have up to 25% exposure to direct offshore government bonds.
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Multi-Strategy Income
peer_benchmark: Fixed Income - Multi-Strat Income Index
broad_market_index: Global Aggregate Hdg Index
structure: Managed Fund