October, 2020
Fiscal and prospective conventional and unconventional monetary easing helped buffer Australian asset markets from rising volatility caused by a COVID-19 resurgence in the Northern hemisphere and the upcoming US election. The Australian equity market outperformed offshore markets, credit spreads continued to narrow and there was a modest lift in inflation expectations. The three-year government bond yield ended the month 4 basis points (bps) lower at 0.12%, three-month bank bills ended the month 3bps lower at 6bps, with markets factoring in a 3bps cash rate at the end of 2021. With the prospect of imminent near zero cash rates, high quality floating rate credit rallied strongly. The Bloomberg AusBond Credit FRN Index returned 0.32%.
The Janus Henderson Conservative Fixed Interest Fund (Fund) outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) returning 0.35% (gross), while the Benchmark returned 0.01%. Over the year to 31 October 2020, the Fund returned 2.56% (gross), which is 2.05%above the Benchmark.
After a significant amount of Term Fund Facility (TFF) borrowing was drawn by the banking system at the end of September, the likelihood of Reserve Bank of Australia (RBA) Quantitative Easing (QE) in November saw the market seeking out high quality, liquid carry assets to put cash to work quickly. Having elected to hold onto our key overweight positions in high quality, liquid alpha strategies this drove further strong of outperformance. AAA rated semi-government securities continued to perform and major bank senior notes resumed their rally. This rally emanated into other credit assets like corporate bonds and major bank subordinated notes.
The extra income provided by the yield in the Fund remains a valuable contributor to return, and despite the decreases in interest rates, the Fund yield remains above 0.60%. Active strategies continue to enhance returns through capital gains in addition to the available income as demonstrated over the past 12 months.
ticker: IOF0047AU
commentary_block: Array
factsheet_url:
Janus Henderson Conservative Fixed Interest Fund – Institutional – Monthly Report
asset_class: Fixed Income
asset_category: Australian Short Term Fixed Interest
peer_benchmark: Fixed Income - Australian Short Term Index
broad_market_index: Australian Bond Bank 0+Y Index
structure: Managed Fund