September, 2023
Against a backdrop of falling markets, the Fund produced a positive return for the September quarter. The period started strongly, but markets then struggled after a hawkish turn from central banks forced interest rates sharply higher late in the period. Strong contributions came from our corporate bond allocations, managed by Macquarie and Pendal respectively. A higher overall weighting than normal towards this asset class further aided the Fund’s return. Meanwhile, our equities managers also performed well.
While there were no major changes to the portfolio over the quarter, we continued to incrementally tilt towards high quality corporate bonds and away from equities, aiding performance in the quarter. In underlying Australian share mandates, we saw new positions added in stocks such as: Elders, where the El Nino emergence created a sharp sell-off and opportunity for a leading agricultural supplier; Orora, a growing and defensive beverage packaging business; and Ampol, which offers attractive yield and buyback opportunities for income investors. Our equity managers remain somewhat more defensive than the market and are well placed to relatively outperform should a recession unfold.
Although the ongoing resilience in economic data and the softening in inflation is providing a perception of a soft landing, it remains the case that policy will remain tight until the employment market is rebalanced. Given the delay in policy impacts, it is still likely that a recession eventuates sometime in 2024. The good news is that higher bond yields can translate to higher future bond returns and, once banks stop raising rates, they can add to the portfolio’s defensive characteristics in a market downturn. Shorter term, it’s quite possible that equities rally into year-end, given expected earnings resilience into the current earnings season. Chinese stimulus, or geopolitical developments could also impact markets both ways.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-14.pdfAugust, 2023
The Fund produced a marginally negative return of -0.1% in August, nonetheless a solid result given mixed market outcomes. Equity markets were mixed over the month, falling approximately -0.7% in Australia and -1.8% in international markets (as measured by the MSCI World (ex-Aust) Hedged index. Bond markets were also mixed with marginally positive returns in Australia while international bonds were slightly negative.
Real assets also struggled with listed infrastructure down circa 4.8% and community infrastructure assets coming in flat. The Fund benefited from higher allocations to solid corporate bond fund performance as well as outperformance from international equities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-1-2.pdfJuly, 2023
The Fund produced a positive return in July, in line with market movements. Equity markets generally performed well over the month, with Australia rising approximately 2.9% and international markets returning around 2.1%. Markets have been boosted by an apparent increased likelihood of a ‘soft landing’, with falling inflation and resilient growth and employment. The Fund benefited from excess returns from its active strategies in Australian and international equity markets, and positive returns from bond holdings.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-13.pdfMay, 2023
The Fund produced a negative return in May, as defensive assets struggled during the month. Bond markets fell in value as interest rates were increased in Australia (contrary to market expectations) and in the US. Other defensive sectors such as listed infrastructure were very weak during the period. Meanwhile equity markets in Australia fell, lagging their international counterparts which were also slightly negative. The Fund benefited from strong performance in higher-quality corporate bonds, while the Fund’s underlying managers on average outperformed their respective market indices.
File:April, 2023
The Fund produced a positive return in April, as market volatility and concerns over banking stress subsided. Risk markets recuperated most of the losses that occurred in March, with both bond and equity markets gaining ground despite renewed uncertainty about the durability of growth. The economic outlook for the US meanwhile has come under scrutiny as the economic environment has deteriorated further. While economic data released during April built further evidence that a recession will likely occur later this year, it is doubtful there will be a major banking crisis. The Fund’s April performance benefitted from retaining a slightly higher allocation to equities as well as stock selection. Franking credit contributions over the last year also remain very strong, with over 1% of additional franking value delivered.
File:March, 2023
The Fund produced a positive return in the March quarter, while performance over one and threeyear periods remains ahead of the Fund’s reference benchmarks and comparable indexed funds - notably so once franking credits are fully valued. The March quarter was characterised by the continued global fight against inflation, with further interest rate increases in the US and Australia, but a recognition in some areas that a pause may be required. Both the US Federal Reserve and the Reserve Bank of Australia raised interest rates twice, to 4.8% and 3.6% respectively. Bond markets, however, rallied in expectation of a pause, and then reduction in rates – possibly starting as early as the second half of this year. Global bond indices rose by over 2.0% during the quarter, while Australian indices rose by over 4.5%. Income strategies generally underperformed the broader market as large growth companies rallied over the quarter, helped along by softening interest rates and a flight from banks. The Fund’s core strategies also lagged this rally somewhat, across equities, corporate bonds and listed infrastructure.
Portfolio allocations changed only slightly throughout the March quarter. Australian equities and listed infrastructure drifted upward, while fixed income moved slightly lower. We expect to resume favouring higher fixed income, driven in part by relatively better yields, but also to reflect a slightly more defensive positioning for the portfolio, notwithstanding the focus on targeting higher-quality and earnings and dividends.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-12.pdfFebruary, 2023
The Fund produced a small negative return in February. Most markets around the world fell in value, triggered by the US interest rate increase at the start of February and forceful comments of Fed chair Powell, who reiterated that inflation remained too high and that it was too early to relax the fight to bring it under control. Property and Infrastructure markets fell the most, by around 4%, whilst global equity markets fell by 1.5% in developed markets and 2.5% in emerging markets.
File:January, 2023
The Fund produced a positive start to 2023, generating a strong, positive return for the month. Bond and equity markets rallied together on signs of peaking global inflation and an acceleration in Chinese economic activity, while the improving inflation outlook, particularly out of the US and Europe, offered hope that the rate hiking cycle would end sooner than expected. In this environment, developed and emerging market equities returns (including Australia) were strong, at over 6%. Bond markets were also up by around 2-3% globally. The nature of the market bounce appeared to be a ‘catch up’ of poorly performing markets and securities in 2022, indicating it may be less resilient than one underpinned by improving fundamentals or lower rates. There were no major portfolio changes in January.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-11.pdfDecember, 2022
The Fund produced modest negative return in December, capping off a tough year driven by inflation and central banks raising rates. The good news is that inflation has, we believe, almost certainly peaked in the US; and is now easing. This is creating a positive near-term environment for both bonds and equities. The flip side is that outside of employment, most activity indicators are showing a slowing economy and high likelihood of recession in the next 12 months.
Over the last two years, the portfolio has leant more heavily into Australian shares to benefit from recovering dividend payments and the associated franking credits. This has played out as expected and the Fund has exceeded its franking targets considerably, whilst at the same time the Australian share market has also outperformed international markets. Equities generally are now relatively less attractive to us than fixed income, due to the reset higher in interest rates. We’ve thus continued to move towards our fixed income strategies in Australian high quality corporate debt and we expect this to both provide diversification if a recession occurs, plus add outright attractive yields of circa 4.5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-10.pdfNovember, 2023
The Fund produced a strong positive return over the month of November. A sharp really was experienced across both bond and equity markets, with some areas, such as listed infrastructure, performing notably well. Global equity markets also rallied by over 5%. Signs of slowing inflation spurred bonds on, returning around 2% over the month in Australia and globally. Despite the rally, most equity and bond markets remain well down this year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-9.pdfOctober, 2022
The Fund produced a positive return in October, amid a pick-up in equity markets which reversed much of September’s losses. In the US, GDP growth surprised to the upside and inflation eased marginally. In Australia, shares gained 6% during the month, led by the financial and energy sectors, while falling Australian bond yields saw some bond proxies such as listed REITs gain almost 10%. In terms of monetary policy, the Reserve Bank of Australia (RBA) raised the cash rate by 0.25 to 2.60%, surprising most bank economists who had expected a 50 basis point rate hike. Meanwhile, the European Central Bank (ECB) raised cash rates by 0.75% to 1.50% in response to persistently high Eurozone inflation, heavily impacted by rising energy costs due to the ongoing war in Ukraine.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-8.pdfSeptember, 2022
In a difficult market environment, the Fund produced a small negative return for the quarter, though franking credits offset a large portion of this fall. We believe the Fund’s underlying strategies remain particularly well suited to the current environment. In Australian equities, our three core managers have outperformed the market collectively by approximately 4% year to-date, while our two international equity strategies have outperformed by approximately 13.5% collectively. In fixed income, both core strategies are down by approximately 1% and 4% respectively year to-date, compared to market indices that are down 10%. Elsewhere, our allocation to the AMP Capital Community Infrastructure Fund has gained by almost 5% year-to-date.
The Fund’s allocation to Australian equities has been reduced over the last year. Meanwhile, we’ve begun to add some exposure towards corporate bonds, where we believe the pivot toward fixed income is moving closer. Many new issues are offering yields of more than 5%. In international shares, the Fund’s holdings continue to emphasise energy stocks, which remain relatively cheap and often have exceptional cash flows, as well as other more defensive areas such as healthcare, though companies such as United Health and AstraZeneca.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-7.pdfAugust, 2022
The Fund produced a small positive return in August, amid significant market volatility and a renewed march higher in global interest rates. Despite a positive month for Australian shares (led by energy), global shares and bond indices fell sharply. Falls were triggered by increasingly hawkish comments from central banks, notably the US, amid higher core inflation figures. The fund benefitted from exposure to Australian shares, the energy sector to some extent, lower exposure to interest rate changes and infrastructure.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-6.pdfJuly, 2022
The Fund was positive in July, as markets experienced a very strong start to the new financial year despite the ongoing angst around higher costs of living and interest rates. An easing in the pace of inflation, where US CPI fell from 9% to 8.5%, along with softer energy and rental prices, saw a relief rally across bonds, credit and equities. The Fund continues to focus on regular and reliable income that grows in line with or above inflation through time. Since inception over a decade ago, the Fund has successfully delivered to investors a highincome stream, a capital base growing above inflation. The distribution yield is presently set at 4.25% after fees and inclusive of franking. This is an increase from last financial year’s target of 3.9% and reflects higher interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-5.pdfJune, 2022
The Fund was negative over the quarter, though again showed considerable resilience relative to broader market falls. Major global bond and equity markets have experienced their worst first-half in over 50 years, as central banks rapidly tighten policy to combat inflation, stoking fears of recession. Year to date, globally, equities have fallen over 18%, bond indices have fallen circa 10% and listed real estate is down over 20%. Pleasingly, nearly all the Fund’s underlying strategies have outperformed market benchmarks year-todate. In FY22, the Fund delivered above its income and franking targets (collectively 3.9%). In addition, due to excess income and larger than normal realised capital gains, the 13th distribution was significantly larger than normal. For FY23, the Fund’s target yield is being increased to 4.25% after fees and inclusive of franking. This is an increase from FY22’s target of 3.9% and reflects higher interest rates
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_h.pdfApril, 2022
While the Fund’s performance was close to flat in April, this was reasonable within the context of more sizeable falls in mainstream markets. The Fund continues to focus on regular and reliable income that grows in line with or above inflation through time. Since inception over a decade ago, the Fund has successfully delivered to investors a highincome stream, with a capital base growing above inflation.
The fund is designed for retirees and targets franking credits. Notably, it has delivered franking credits of over 0.9% per annum, including over 1.5% in the year to the end of March 22. The Fund’s bespoke strategies performed well in April in a market roiled by rising interest rates, with all 5 core equity managers outperforming broader market indices.
The distribution yield is presently set at 3.9% (including franking and after fees), a yield that is approximately 15 times the level of current average one-year term deposits.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-4.pdfSeptember, 2021
The Fund delivered a small negative return in September, while returns year-to-date continue to be strong. The month was notable for the negative performance of both equity and bond markets, where the Fund showed a degree of resilience as bond yields rose. A standout this month was elevated franking receipts accrued, with the Fund currently tracking at above double its initial target of 0.65%. The distribution yield is presently set at 3.9% (including franking and after fees), a yield that is around 15 times the level of current average one-year term deposits. The Fund’s focus continues to be the production of regular, reliable income that grows in line with or above inflation through time, while maintaining liquidity and low costs
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-1-1.pdfJune, 2021
The Fund delivered another positive return in the June quarter. At present, the distribution yield is set at 3.9% (including franking and after fees), a yield that is around 13 times the level of current average one-year term deposits. The 2020/21 financial year has been highly unusual given the pandemic’s impact on dividends and yields. While income has been curtailed from the market, company earnings continue to recover at a rapid clip, and this has been reflected in higher capital gains. Franking credits remain on track for our target of 0.65% at fund level, before rising again for this financial year.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-3.pdfMay, 2021
The Fund delivered a small positive return in May, buoyed by corporate earnings growth as the global recovery continued to play out. Rising inflation and hence eventual central bank tightening, continued to be a concern, although this was still largely outweighed by broader, recovery-related optimism. The US Federal Reserve (Fed) also added some short-term comfort, by continuing to play down talk of potentially tapering off its enormous quantitative easing program. As always, we remain focussed on maintaining the Fund’s objective of generating regular and reliable income, growing above inflation
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-2.pdfApril, 2021
The Fund delivered another positive return in April, as share markets continued to rise, driven by a strong global economic recovery from the impacts of COVID-19.
Massive fiscal stimulus programs, particularly in the US, continued to provide a source of optimism for future corporate earnings while central banks remained dovish. Australian data meanwhile was strong; consumer confidence rose in April to an 11-year high, business confidence remains positive and business conditions reached their highest on record, suggesting that after the vaccine rollout the economy should have a stable platform for growth. The Fund, meanwhile, is maintaining its objective of generating regular and reliable income, growing above inflation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k-1.pdfDecember, 2020
The Fund performed strongly in the fourth quarter, resulting in a modest positive return over a one-year period. Global equity markets had a very strong quarter as vaccine trial results surpassed expectations and global earnings expectations continued to improve. Australian growth assets also had a very strong quarter, spurred on by the additional tailwinds of central bank support, a stimulatory budget and improvement in the Victorian virus situation. Listed real assets lagged the strong equity market, being were more affected by lingering COVID-19 uncertainty, whilst corporate bonds were slightly positive. Dividend payments in Australia remained very low compared to historic levels, resulting in a slight shortfall to current income targets. More recently, this has been offset with very strong capital gains.
There were no major asset allocation changes over the month. Stock changes involved some rotation into COVID-19 related recovery sectors, including banks and real estate. Exposure to corporate debt continues to be steadily reduced at elevated prices, whilst Australian equities have remained overweight.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/ffs-iwig_k.pdfasset_class: Multi-Asset
asset_category: Multi-Asset Income
peer_benchmark: Multi-Asset - Multi-Asset Income Index
broad_market_index: Multi-Asset Growth Investor Index
manager_contact_details: Array
ticker: IPA0076AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
Latest Performance Report. => Class K
fund_features:
AMP Capital Income Generator aims to provide regular income with some capital growth over the medium to long term.The Fund’s internal performance benchmark is the average weighted return of the relevant market indices used to measure the performance of the underlying asset classes in which the Fund invests. The portfolio invests in a diversified mix of growth and defensive assets with a focus on income generation using a range of specialist investment managers. While open to all investors, this fund has been designed with low marginal tax-payers in mind.
structure: Managed Fund