September, 2023
The Yarra Income Plus Fund returned 0.37% (net basis) over the September quarter, underperforming the Bloomberg AusBond Bank Bill Index by 71 bps.
Diversified Credit and Hybrid sleeves contributed meaningfully to performance. Strong carry, particularly in the credit sleeve underpinned strong quarterly performance. Some tightening of spreads over the quarter helped provide modest price return. The Fixed Income sleeve was weaker over the period but positive, nonetheless. Carry again proved to be a significant contributor to performance during the quarter but movement in the yield curve did have a negative impact on price performance.
Performance in the Real Assets sleeve was negative, reflecting a shift in sentiment that has caused a sell-off in the REIT sector. This was the only sleeve detracting from performance. During the quarter, weights were adjusted as we looked to reduce our position in bonds. With spreads are still attractive in hybrids, we elected to reduce our underweight position and decrease our underweight cash position as we sought other opportunities. We also selectively increased our position in REITs.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Sept-2023.pdfJune, 2023
The Yarra Income Plus Fund returned 0.15% (net basis) over the June quarter, underperforming the Bloomberg AusBond Bank Bill Index by 75 bps. Performance in the Real Assets sleeve was positive, with a shift in sentiment offset selling in long-duration assets which helped to support the position. Diversified Credit and Hybrid sleeves also contributed meaningfully to performance. Running yield has provided a significant tailwind, comfortably offsetting a modest widening of spreads. We expect this thematic to persist for some time given the large increase in cash rates. The Fixed Income sleeve was weak over the period. Bond markets priced in another round of rate hikes across global central banks, pushing yields significantly higher.
Selling in the sleeve is making future opportunities increasingly compelling. No changes were made to the Fund’s tactical asset allocation during the quarter. We continue to hold conviction in our overweight Fixed Income position, confident that duration will come back into favour.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Jun-2023.pdfMarch, 2023
The Yarra Income Plus Fund returned 2.63% (net basis) over the March quarter, outperforming the Bloomberg AusBond Bank Bill Index by 184 bps.
Performance in the Real Assets sleeve was positive. A shift in sentiment led to a broad-based rally benefitting the sleeve.
Diversified Credit was also a strong contributor. Elevated levels of carry continue to underpin positive performance. Running yield remains at an attractive level, and will continue to provide strong downside protection for some time.
The Fixed Income sleeve performed well over the quarter.
Issues in the global banking sector led investors to price an impending rate cutting cycle. As such, long duration securities performed very well. Despite the rally, the yield on offer in the sleeve continues to look attractive.
No changes were made to the Fund’s tactical asset allocation during the quarter. We continue to hold conviction in our overweight Fixed Income as it seems duration has further to rally.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Mar-2023.pdfDecember, 2022
The Yarra Income Plus Fund returned 2.54% (net basis) over the December quarter, outperforming the Bloomberg AusBond Bank Bill Index by 180 bps. A number of changes were made to the Fund’s tactical asset allocation during the period. Early in the quarter we moved underweight Hybrids in favour of Property, Infrastructure and Utilities. The moved proved favourable as risk sentiment improved early in the quarter. Following the risk rally, we moved from overweight back to neutral Property, Infrastructure and Utilities and reduced our underweight position in cash. Performance from the Real Assets sleeve was positive over the quarter.
Weak economic data led markets participants to position for a possible central bank pivot. As such, equity markets performed well over the period. Diversified Credit also contributed positively to performance. Tightening spreads and elevated levels of carry drove strong returns. Running yield remains at high levels and is offering significant downside protection. The Fixed Income sleeve also contributed positively to performance, despite yields trading wider over the period. Offsetting weakness from wider yields was the sleeve’s running yield, which remains attractive. The Reserve Bank of Australia (RBA) raised the cash rate a cumulative 75 bps over the quarter, taking the cash rate to 3.10%. The Cash sleeve is now presenting more attractive yield; however, we still see better value in other sleeves at our disposal.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Dec-2022.pdfSeptember, 2022
The Yarra Income Plus Fund returned -0.84% (net basis) over the September quarter, underperforming the Bloomberg AusBond Bank Bill Index by 127 bps. On a 12-month view, the Fund returned -3.79%, underperforming its benchmark by 431 bps on a net basis. We made a number of changes to the Fund’s tactical asset allocation during the quarter. We further reduced our cash allocation moving further overweight Fixed Income and Diversified Credit where outright yield have become increasingly compelling. Duration sold-off yet again leading to weak performance within the Real Assets sleeve. The sleeve underperformed the broader market during the period. Diversified Credit was a strong contributor to performance during the quarter. Spreads were relatively flat over the period, performance was instead driven by strong running yield. Wide spreads and strong underling yield continue to provide attractive carry.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Sept-2022.pdfAugust, 2022
The Yarra Income Plus Fund returned -0.73% (net basis) in August, underperforming the Bloomberg AusBond Bank Bill Index by 89 bps. No changes were made to the Fund’s target asset allocation during the month. We remain comfortable in our overweight to Fixed Income following the significant sell-off in duration, and remain underweight Cash given the better relative return in sleeves such as Diversified Credit. Our neutral position in Real Assets and Hybrids was unchanged.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Aug-2022.pdfJune, 2022
The Yarra Income Plus Fund returned -1.08% (net basis) over the June quarter, underperforming the Bloomberg AusBond Bank Bill Index by 113 bps. On a 12-month view, the Fund returned -2.12%, underperforming its benchmark by 222 bps on a net basis. We made a number of changes to the Fund’s tactical asset allocation during the quarter. We reduced our allocation to Cash and Hybrid sleeves in favour of the longer duration Fixed Interest sleeve.
We remained neutral Real Assets and overweight Diversified Credit. The Real Assets sleeve detracted from performance. The sleeve underperformed the broader market as long duration assets were heavily sold off. Exacerbating negative returns was weakened risk sentiment. Diversified Credit also detracted from performance, with elevated investor risk aversion driving a widening in credit spreads.
With the underlying yield moving far higher and credit spreads wider, the risk-return dynamics may be looking increasingly attractive. Long duration assets sold off significantly on persistent inflation pressures and hawkish central bank commentary. As such, the Fixed Income sleeve was a large detractor from performance. The Reserve Bank of Australia (RBA) began hiking rates at its May meeting with a 25 bps rise, followed by another 50 bps in June, taking the cash rate to 0.85%. Several more hikes to follow between now and year-end appear inevitable. At this stage we still see better value across the other sleeves at the Fund’s disposal.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Jun-2022.pdfMarch, 2022
The Yarra Income Plus Fund returned -1.72% (net basis) over the December quarter, underperforming the Bloomberg AusBond Bank Bill Index by 173 bps. On a 12-month view, the Fund returned 1.81%, outperforming its benchmark by 177 bps on a net basis. No changes were made to the Fund’s asset allocation during the quarter.
Russia’s invasion of Ukraine added further pressure to inflationary woes. As such, the Fixed Income sleeve was the largest detractor from performance. Given how much yields have sold off, we believe the sleeve is beginning to offer some compelling value.
The Real Assets sleeve detracted from performance during the quarter, with weaker risk tolerance and rising yields weighing on performance. Real Assets tend to trade lower in the context of rising real yields which we have started to observe.
The Hybrid sleeve was slightly weaker over the quarter. Despite strong market liquidity and relatively few new deals, hybrids traded lower during the period. Outright yields in the sleeve pushed far higher as yields moved up.
Diversified Credit detracted as spreads softened. Demand for high quality corporate names remains robust, particularly at the long end where the level of outright yield is becoming increasingly compelling.
It appears increasingly likely that the Reserve Bank of Australia (RBA) will lift rates in June 2022. While this will lift the yield on offer in the cash sleeve, at this point in time we see better value across other asset classes
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Mar-2022.pdfSeptember, 2021
The Yarra Income Plus Fund returned 0.88% (net basis) over the September quarter, outperforming the Bloomberg AusBond Bank Bill Index by 87 bps. All sleeves contributed positively to return, led by our exposure to Real Assets. On a 12-month view, the Fund returned 4.84%, outperforming its benchmark by 480 bps on a net basis. We made a minor change to positioning late in the quarter, increasing our underweight position in cash and adding to our exposure to Diversified Credit.
The Real Assets sleeve led performance over the quarter as a strong corporate reporting season drove valuations higher. Significant dividends and sizable buy-backs were commonplace, further supporting risk-on sentiment. The sleeve pulled back late in the period as bond yields pushed higher
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Sep-2021.pdfJune, 2021
The Yarra Income Plus Fund returned 1.82% (net basis) over the June quarter, outperforming the Bloomberg AusBond Bank Bill Index by 102 bps. All sleeves contributed positively to return, led by our exposure to Real Assets. On a 12-month view, the Fund returned 5.09%, outperforming its benchmark by 503 bps.
Early in the quarter we increased our exposure to Real Assets, adjusting back to a neutral position late in the period. Real Assets produced a strong quarter, benefitting from the reduction in yields and risk asset rally. As valuations continued to climb we elected reduce the position, removing some risk given equity markets may struggle in the face of ongoing uncertainty regarding tapering and large inflation prints out of the US.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Jun-2021.pdfMay, 2021
The Yarra Income Plus Fund returned 0.03% (net basis) in May, outperforming the Bloomberg AusBond Bank Bill Index by 3 bps. Performance over the month was led by the Fund’s exposure to Diversified Credit, with Real Assets the only detractor. On a 12-month view, the Fund returned 4.37%, outperforming the Bloomberg AusBond Bank Bill Index by 431 bps on a net basis.
Our target asset allocation remained unchanged over the month. We continue to skew in favour of higher yielding asset classes rather than Fixed Interest and Cash.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-May-2021.pdfMarch, 2021
The Yarra Income Plus Fund returned 0.06% (net basis) over the March quarter, outperforming the Bloomberg AusBond Bank Bill Index by 5 bps. The quarterly return was led by our exposure to Hybrids closely followed by Diversified Credit. Real Assets and Fixed Interest both detracted from performance over the period. On a 12-month view, the Fund returned 7.32%, outperforming its benchmark by 721 bps on a net basis.
We maintained our allocation to Real Assets over the quarter. While the rise in yields weighed on the sleeve’s performance during the quarter, as they began to stabilise Real Assets significantly outperformed. Widespread economic re-opening will continue to support the sector and we remain confident in the sleeve’s ability to provide further consistently strong yield. As such we remain comfortable in our overweight position.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Mar-2021.pdfDecember, 2020
The Yarra Income Plus Fund returned 2.02% (net basis) over the December quarter, outperforming the Bloomberg AusBond Bank Bill Index by 200 bps. The quarterly return was led by the Fund’s exposure to Real Assets, with all other sleeves also contributing positively to returns. On a 12-month view, the Fund returned 0.03%, underperforming its benchmark by 33 bps on a net basis. During the quarter we moved from neutral to overweight Real Assets. This proved to be well-timed as investors flocked to risk assets, particularly those most highly impacted by the lockdown. As the economic recovery continues, we anticipate this allocation to provide consistent yield which will be in high demand given the low rate environment. Such conditions will also continue to support strong valuations in the sector. We further increased our overweight position in Hybrids during the period. New issuance remained elevated into the end of 2020, providing an abundance of opportunities within the sleeve. We continue to maintain a very high yielding sleeve that looks attractive on a risk-adjusted basis. While the market has rallied significantly, it remains above historical lows, and as a result we remain comfortable holding an increased overweight position. We also moved further overweight Diversified Credit. Australia’s outperformance in suppressing the virus continued to underpin a robust economic recovery. While small outbreaks are inevitable, we maintain the capacity to leave much of the economy open while clamping down on such incidences.
During the quarter we reduced our underweight position in Fixed Interest. Given the RBAs commitment to buying the long-end of the yield curve, we anticipate the Fixed Interest sleeve will trade within a predictable range. As such, we feel comfortable with an increased allocation. We moved further underweight Cash over the quarter. The RBAs cash rate cut has put further downward pressure on the yield of our cash allocation; we remain confident in our ability to achieve far higher returns across the other sleeves of the portfolio.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Yarra-Income-Plus-Fund-Dec-2020.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: JBW0016AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://www.yarracm.com/fixed-income-and-multi-asset/yarra-income-plus-fund/
Investment Insight
fund_features:
Yarra Income Plus Fund aims to provide regular income and to achieve medium term capital growth through exposure to cash, money market products, domestic fixed interest and a range of high yielding investments, including domestic hybrid investments, property, infrastructure and utilities securities and international fixed interest assets. In doing so, the Fund seeks to outperform the Bloomberg Ausbond Bank Bill Index over rolling three-year periods. The Fund has exposure to a range of assets including hybrid investments, floating rate credit investment, property, infrastructure and utilities securities, government bonds, corporate and high yield debt products, and cash and cash equivalents.
structure: Managed Fund