September, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity increased from 24.61% to 27.41%.
Interest Rate Duration Position: → 0.08 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limited the realised volatility and losses in the fund from government bond volatility over the month (36 basis point increase for AU 3-year bond yields). The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Decreased from 45.65% to 43.31%. Optimisation within the corporate bond sector was skewed towards AUD corporates and USD financials. Corporate bonds, traditionally, present modest relative value over bank senior bonds due to the rating differential; and this relative value was maintained over the month as both financial and corporate bond spreads remained stable. Corporate bond volatility was relatively muted over the month of September. Subordinated debt was optimized towards Australian and foreign banks in EUR. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained in line with last month at 29.28%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.72 years.
Public structured credit market yields continued to rally over the month of September. This was driven by both the offshore bid into structured markets continued, along with a lack of supply on dealer inventory sheets. New primary transactions remain significantly overbid with public market interest, leading to secondary markets trading at tighter yields than to newly issued stock. Issuers continue to utilise these tighter margins to issue new transactions at more economic levels, with a healthy pipeline of new public trades expected to come to market over the next month.
With respect to market performance, Prime arrears as reported by S&P’s SPIN index improved 4bp over the month of August to 0.92%. Nonconforming arrears weakened slightly, widening 7bps to 3.70%. Both results remain very strong in comparison to both market expectations and historic index levels.
Targeted risk across the Fund: ↓ Targeted risk decreased from 0.87% to 0.80%, reflecting the optimisation within portfolio limits. Meanwhile, realised standard deviation is at 0.40%. This has risen over the short term due to increased volatility in mark to market valuations. The portfolio remains defensively positioned although despite this, the fund has performed relatively well over the last 12 months, delivering 5.39% after fees. This is evidence that the strategy is well designed, delivering a reasonable premium over cash while maintaining a very tight distribution of returns month on month. The fund remains compliant with the portfolio ESG risk limits.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Flyer-edited-Short-Term-Income-Fund-September-2023.pdfAugust, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased from 25.77% to 24.61%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limited the realised volatility and losses in the fund from government bond volatility over the month (39 basis point trading range for AU 3-year bonds). The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased from 44.62% to 45.65%. Optimisation within the corporate bond sector was skewed towards financials due to primary issuances in the market. Corporate bonds, traditionally, present modest relative value over bank senior bonds due to the rating differential; and this relative value was maintained over the month as both financial and corporate bond spreads tightened. Corporate bond volatility, albeit small, was driven partly by movement in swap spreads from hedging activity. Subordinated debt was optimized towards Australian banks in EUR. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained in line with last month at 29.77%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.74 years.
Public structured credit market yields continued to tighten over the month of August, with the strong offshore bid maintained in the senior and higher rated mezzanine tranches. Margins across lower credit grade portions of the capital structure also tightened, especially around the A and BBB rated tranches, as investors began to compete for supply as margins continued to tighten. Issuers continue to utilise the cheaper funding margins to issue transactions at more economic levels. This has led to a large number of new transactions seeking to price over the period across a wide range of subsectors including regional bank trades, both prime and non-conforming RMBS, and asset backed securities.
With respect to market performance, Prime arrears as reported by S&P’s SPIN index improved 1bp over the month of July to 0.96%. Nonconforming arrears weakened slightly, widening 16bps to 3.63%. Both results remain very strong in comparison to both market expectations and historic index levels.
Targeted risk across the Fund: ↓ Targeted risk decreased from 0.90% to 0.87%, reflecting the increase in market volatility and optimisation within portfolio limits. Meanwhile, realised standard deviation is at 0.39%. This has risen over the short term due to increased volatility in mark to market valuations. The portfolio remains defensively positioned although despite this, the fund has performed relatively well over the last 12 months, delivering 5.08% after fees. This is evidence that the strategy is well designed, delivering a reasonable premium over cash while maintaining a very tight distribution of returns month on month. The fund remains compliant with the portfolio ESG risk limits.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-August-2023.pdfJuly, 2023
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased from 24.45% to 25.77%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limited the realised volatility and losses in the fund from government bond volatility over the month (51 basis point trading range for AU 3-year bonds). The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Decreased from 45.61% to 44.62%. Optimisation within the corporate bond sector was balanced.
Corporate bonds, traditionally, present modest relative value over bank senior bonds due to the rating differential; and this relative value was maintained over the month due to relatively stable credit spreads. Corporate bond volatility, albeit small, was driven partly by swap spreads. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained in line with last month at 29.62%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.76 years.
Public structured credit market yields began to tighten over the month of July, with reports of a strong offshore bid returning to the market. This was especially prevalent in the senior portions of the capital structure in prime transactions, with the bid tightening credit margins across the sector.
Tighter yields continue to make transaction more economic for issuers, leading to a substantial amount of primary deal flow looking to price in markets over the next month, including several regional bank trades, along with both prime and non-conforming RMBS.
With respect to market performance, Prime arrears as reported by S&P’s SPIN index improved 3bps over the month of June to 0.97%. Nonconforming arrears also improved, tightening 16bps to 3.47%. Both results remain very strong in comparison to both market expectations and historic index levels.
Targeted risk across the Fund: ↑ Targeted risk increased from 0.89% to 0.90%, reflecting the increase in market volatility and optimisation within portfolio limits. Meanwhile, realised standard deviation is at 0.44%. This has risen over the short term due to increased volatility in mark to market valuations. The portfolio remains defensively positioned although despite this, the fund has performed relatively well over the last 12 months, delivering 4.85% after fees. This is evidence that the strategy is well designed, delivering a reasonable premium over cash while maintaining a very tight distribution of returns month on month. The fund remains compliant with the portfolio ESG risk limits.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-July-2023.pdfJune, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 24.45% from 25.23%.
Interest Rate Duration Position: → 0.08 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limited the realised volatility and losses in the fund from a government bond sell-off over the month. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased from 44.93% to 45.61%. Optimisation within the corporate bond sector was skewed towards financials. Corporate bonds, however, continue to present modest relative value over bank senior bonds; and this relative value increased over the month due to financials outperforming corporates. Corporate bond volatility, albeit small, was driven partly by swap spreads. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained in line with last month at 29.94%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.61 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-June-2023.pdfMay, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 25.23% from 25.48%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limits the realised volatility and losses in the fund from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 44.93% from 44.76%. Optimisation within the sector was skewed towards Corporate bonds over Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; and this relative value increased over the month due to primary issuances. Short end Australian There was slight divergence in credit spreads over the month, with financial securities outperforming corporate bonds. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained in line with last month at 29.83%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.64 years.
Public structured credit market yields began to tighten into month end, in line with other credit markets. Primary market issuance was less active in May than April, but include both a new bank transaction and regional bank transaction amongst other non-conforming programs.
Secondary markets were more active over the month as investors looked away from the limited primary market supply to increase allocation to the sector.
With respect to market performance, Prime arrears as reported by S&P’s SPIN index weakened 2bps over the month of March to 0.95%, with Bloomberg reporting prime arrears for April remaining inline with the prior month at 0.93%. Nonconforming arrears improved 29bps to 3.70% as reported by S&P for the March period, with Bloomberg’s arrears index for nonconforming loans for April also improving 26bps to 3.01%. Both results remain very strong in comparison to both market expectations and historic index levels.
Targeted risk across the Fund: ↑ Targeted risk increased to 0.88% from 0.85%, reflecting the increase in market volatility and optimisation within portfolio limits. Meanwhile, realised standard deviation is at 0.47%. This has risen over the short term due to increased volatility in mark to market valuations. The portfolio remains defensively positioned although despite this, the fund has performed relatively well over the last 12 months, delivering 3.62% after fees. This is evidence that the strategy is well designed, delivering a reasonable premium over cash while maintaining a very tight distribution of returns month on month. The fund remains compliant with the portfolio ESG risk limits.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-May-2023.pdfApril, 2023
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 25.48% from 24.88%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number limits the realised volatility and losses in the fund from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 44.76% from 45.33%. Optimisation within the sector was skewed towards Subordinated debt over Corporate bonds. Corporate bonds continue to present modest relative value over bank senior bonds; and this relative value increased over the month due to primary issuances. Short end Australian Credit spreads were generally stable over the month, with any concerns limited to US regional banks. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.75%. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.68 years.
Public structured credit market yields widened over the course of the month in line with other credit markets. Yields remain wide in comparison to historic market spread averages, all subsets of the capital structure widening. Whilst secondary markets were relatively quiet, primary markets saw several new trades issued including regional bank programs, two non-conforming transactions and several auto and personal loan programs. The pipeline of primary transactions remains robust, with a number of new trades looking to price in market over the next few weeks.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-April-2023.pdfMarch, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 24.88 from 26.12%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the realised volatility and loss in the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 45.33 from 44.34%. Optimisation within the sector was skewed towards Corporate bonds over Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; and this relative value increased over the month due to primary issuances. General risk-off sentiment, driven by a fall in investor confidence due to global financial stability concerns, drove credit spreads slightly wider over the month. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.79%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.67 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-March-2023.pdfFebruary, 2023
Cash and Short-Term Liquidity Weighting: ↓Cash and Short dated liquidity decreased to 26.12% from 26.64%.
Interest Rate Duration Position: → 0.11 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the realised volatility and loss in the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 44.34% from 43.47%. Optimisation within the sector was skewed towards Corporate bonds over Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; and this relative value increased as bank senior bonds repriced tighter. General risk-on sentiment proved to be conducive to credit spreads over the month - contributing to the fund’s highest monthly performance. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.53%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.81 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-February-2023.pdfJanuary, 2023
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 26.64% from 28.22%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the realised volatility in the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 43.47% from 41.93%. Optimisation within the sector was skewed towards Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. General risk-on sentiment proved to be conducive to credit spreads over the month and APRA’s approval of the Westpac T2 call added to the sentiment. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.89%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.85 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-January-23-3.pdfDecember, 2022
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 28.22% from 26.82%.
Interest Rate Duration Position: → 0.08 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the realised volatility in the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 41.93% from 43.43%. Optimisation within the sector was skewed towards Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. There was very muted volatility in the credit market, not surprising given the festive season, and as a result portfolio settings weren't altered materially. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.85%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.92 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-December-22-1.pdfNovember, 2022
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 26.82% from 26.24%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the realised volatility in the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 43.43% from 44.18%. Optimisation within the sector was skewed towards Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated corporate bonds rallied slightly driven by a decrease in swap spreads, while bank senior bonds rallied modestly. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.75%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.90 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-November-22.pdfOctober, 2022
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 26.24% from 24.35%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 44.18% from 45.80%. Additions within the sector were balanced across Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated corporate bonds sold off modestly driven by an increase in swap spreads, while bank senior bonds sold off slightly. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.58%. As at month end, the portfolio held an A- average credit rating and a relatively short weighted credit duration of 1.88 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-October-22-1.pdfSeptember, 2022
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 24.35% from 24.32%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 45.8% from 45.86%. Additions within the sector were balanced across Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated corporate bonds were slightly volatile but ended the month where they commenced, while bank senior bonds sold off slightly. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation to structured credit securities remained inline with last month at 29.84%. As at month end, the portfolio maintained an A average credit rating and a relatively short weighted credit duration of 1.77 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-September-22-4.pdfAugust, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 24.32% from 26.36%.
Interest Rate Duration Position: → 0.11 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund over the month from continued bond market volatility. The strategy will, as a rule, only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 45.86% from 45.16%. Additions within the sector were balanced across Corporate bonds and Subordinated debt. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated corporate bonds widened slightly, while bank senior bonds were stable. The short, conservative nature of the sector and diversification aided in cushioning the market volatility over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Short-Term-Income-Fund-August-22.pdfJuly, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 26.36% from 27.49%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund over the month from continued bond market volatility. The strategy will, as a rule, only takes modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 45.16% from 42.95%. Additions within the sector were skewed to Corporate bonds and towards optimising short dated liquidity. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated financial and corporate bonds tightened slightly, reversing the recent momentum. The short, conservative nature of the sector aided in cushioning the market volatility over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-4.pdfJune, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 27.49% from 27.78%.
Interest Rate Duration Position: → 0.09 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund in June from continued bond market volatility. The strategy will, as a rule, only takes modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 42.95% from 42.68%. Additions within the sector were skewed to Subordinated debt and towards optimising short dated liquidity. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated financial and corporate bonds continued to sell-off, although the momentum moderated. The short, conservative nature of the sector aided in cushioning the market volatility in June.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation remained in line with last month at 29.6% as funds remained optimally deployed within the structured credit sector. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.60 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-6.pdfMay, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 27.78% from 30.28%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund in May from a continued bond market sell-off. The strategy will, as a rule, only takes modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 42.68% from 40.15%. Additions within the sector were skewed to Subordinated debt and towards optimising short dated liquidity. Corporate bonds continue to present modest relative value over bank senior bonds; however, this value is eroding as bank senior bonds are repricing wider. Over the month, short dated financial and corporate bonds continued to sell-off, although the momentum moderated. The short, conservative nature of the sector aided in cushioning the market volatility in May.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation remained in line with last month at 29.5% as funds remained optimally deployed within the structured credit sector. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.69 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-5.pdfApril, 2022
Cash and Short-Term Liquidity Weighting: ↑ Cash and Short dated liquidity increased to 30.28% from 27.03%. Interest Rate
Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. Having a low IRD number has limited the losses of the fund in April from a continued bond market sell-off. The strategy will as a rule only takes modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased to 40.15% from 43.91%. Reductions within the sector were skewed to corporate debt and towards optimising short dated liquidity. Corporate bonds continue to present modest relative value over bank senior bonds, however, this value is eroding as bank senior bonds are repricing wider. Over the month short dated financial and corporate bonds continued to sell-off, however the momentum moderated. The short, conservative nature of the sector aided in cushioning the significant market volatility in April.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation remained in line with last month at 29.6% as funds remained optimally deployed within the structured credit sector. As at month end, the portfolio maintained an A- average credit rating and a relatively short weighted credit duration of 1.74 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-4.pdfMarch, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short-dated liquidity decreased to 27.03% from 29.43%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain an interest rate duration of approximately 3 months as on average. Having a low IRD number has limited the losses of the fund in March from a bond market sell-off, a level comparable to significant historical events. The strategy will as a rule only takes modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 43.91% from 41.18%. Investments within the sector were skewed towards corporate debt and towards optimizing credit duration within limits. Corporate bonds continue to present modest relative value over bank senior bonds, however, this value is eroding as bank senior bonds are repricing wider. Over the month short-dated financial and corporate bonds experienced a sharp sell-off driven by global events, contributing to the fund’s first negative return. The short, conservative nature of the sector aided in cushioning the significant market volatility in March.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-3.pdfFebruary, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 29.43% from 30.78%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. However, the manager can increase interest rate exposure to as high as one year under certain conditions. The strategy will as a rule only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 41.18% from 39.77%. Investments within the sector were skewed towards corporate debt and towards optimising credit duration within limits. Corporate bonds continue to present modest relative value over bank senior bonds following general risk market weakness over the month. The corporate book is very conservatively positioned in short dated senior paper of Australian ADIs and investment grade companies - these assets experience very low levels of relative market volatility.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-2.pdfJanuary, 2022
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 30.78% from 31.71%. Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. However, the manager can increase interest rate exposure to as high as one year under certain conditions. The strategy will as a rule only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↑ Increased to 39.77% from 38.62%. Investments within the sector were skewed towards corporate debt and towards optimising credit duration within limits. Corporate bonds presented modest relative value over subordinated debt following general risk market weakness over the month. The corporate book is very conservatively positioned in short dated senior paper of Australian ADIs and investment grade companies - these assets experience very low levels of relative market volatility.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation remained in line with last month at 29.5% as funds remained optimally deployed within the structured credit sector. The portfolio sits at an A- average credit rating and a relatively short weighted credit duration of 1.84 years.
File: https://commentary.quantreports.net/wp-content/uploads/2022/02/Realm-Short-Term-Income-Fund-Update-S-1.pdfDecember, 2021
Cash and Short-Term Liquidity Weighting: ↓ Cash and Short dated liquidity decreased to 31.71% from 32.24%.
Interest Rate Duration Position: → 0.10 years. The strategy will maintain interest rate duration of approximately 3 months as an average. However, the manager can increase interest rate exposure to as high as one year under certain conditions. The strategy will as a rule only take modest interest rate risk.
Corporate & Subordinated Debt Allocation: ↓ Decreased slightly to 38.62% from 39.06%. Investments within the sector were skewed towards corporate debt and towards optimising credit duration within limits. Corporate bonds presented modest relative value over subordinated debt following general risk market weakness over the month. The corporate book is very conservatively positioned in short dated senior paper of Australian ADIs and investment grade companies - these assets experience very low levels of relative market volatility.
Residential Mortgage-Backed Securities (RMBS) & ABS: → Allocation remained in line with last month at 29.7% as funds remained optimally deployed within the structured credit sector. The portfolio sits at an A- average credit rating and a relatively short weighted credit duration of 1.92 years.
December issuance was sporadic, with only a limited number of transactions coming to the market over the month. Two transactions launched, including an equipment backed transaction from Pepper, and one non-conforming transaction from Bluestone. Pricing remains well bid in both the middle mezzanine (A/BBB rated) and junior mezzanine (sub investment grade rated) parts of the capital structure. Pricing in senior and senior mezzanine (AAA/AA rated) parts of the capital structure remains weak, with low coverage rates continuing to be observed as investors continue to look toward higher yielding tranches. With respect to market performance, the S&P arrears index (SPIN) for October remained inline with last month at 0.79%. This continues to be the lowest level recorded by the index since 2004.
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FUND UPDATE
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