September, 2023
The Fund's running income above benchmark contributed to outperformance during the month. The Fund continues to collect a healthy yield premium above benchmark attributable to overweight allocations to domestic banks and non-financial corporates as well as off benchmark exposure to securitised sectors. The portfolio running yield at month end was 4.0% with the spread measured at 1.1%.
While rising bond yields impacted the Fund's absolute return, the Fund's marginally shorter than benchmark duration contributed to outperformance. Bond yields sold off throughout the month as markets priced an extended period of restrictive rates, in line with hawkish central bank rhetoric. The Fund maintained its relative duration positioning, marginally short of benchmark with an underweight exposure to very short end alongside a small allocation to securitised floating rate assets.
spread dynamics were mixed for performance. Spreads consolidated through September before widening towards the end of the month. Security selection within non-financial corporates contributed to credit spread return with issuers in the energy and rall sectors performing well. The Fund's underweight allocation to semi-government spreads detracted slightly as semi spreads tightened. The Fund maintains an elevated exposure to credit relative to the benchmark with the largest active exposures in domestic banks, non-financial corporate and securitised sectors. The Manager was selective in adding issues to the portfolio during September. Allocation to offshore banks was increased while semi-government and government exposure were trimmed The Manager elected to take profit on a long position in the ITraxx Euro Xover index which tracks corporate Issuers on the cusp of
investment grade, closing the position in late September The outlook for credit is negative and the Manager remains cognisant of the challenging macro environment and the risks associated with tighter lending conditions. The Fund is defensively positioned and the manager remains focused on identifying relative value opportunities presented as the outlook improves.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-2-1.pdfAugust, 2023
The Fund's running income above benchmark was a key contributing factor to outperformance during the month. The Fund continues to collect a healthy yield premium via overweight allocations to domestic bank, non-financial corporate and securitised credit. The portfolio running yield at month end was 3.9% with the spread measured at 1.1%.
Interest rate dynamics were positive for absolute return during a month of elevate volatility for bond yields. Long term yields sold off over the first half of August before recovering while the short end rallied throughout the month. The Fund's underweight exposure to the short end detracted marginally from outperformance. In mid-August, the Manager rotated into shorter dated government bonds, adding exposure to 3-and-5 year tenors which contributed to outperformance as the curve continued to steepen. At month end, the Fund remained marginally short of benchmark duration.
Credit spread contraction was a significant contributing factor to outperformance during the month. Spreads continued to grind tightener, supported by better-than- expected corporate earnings and the slowed pace of monetary policy tightening. The Fund's overweight allocation to credit was rewarded with non-financial corporates, domestic banks and REITs exposures all contributing to relative spread return. Off-benchmark allocation to RMBS was rewarded as securitised spreads performed well.
Sector allocations were actively managed during August. During a busy month for primary issuance, the Manager added exposure to domestic banks, taking part in new senior unsecured deals from Westpac, CBA and ANZ. Elsewhere, the Manager continued to rotate semi-government allocations, adding exposure to Treasury Corporation of Victoria while trimming other state government positions.
The outlook for credit is balanced, the Manager remains cognisant of the challenging macro environment and the risks associated with tighter lending conditions. The Fund is defensively positioned and the manager remains focused on identifying relative value opportunities presented as the outlook Improves.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-1-1.pdfJuly, 2023
The Fund's robust running yield contributed to outperformance during the month. The Fund's allocation to non-financial corporates, domestic banks and RMBS were the strongest contributors to relative Income return. The portfolio running yield at month end was 3.8% with the spread measured at 1.1%
Duration positioning detracted marginally from outperformance during the month. Short term yields rallied following the RBA's decision to keep rates on hold while long term yields sold off marginally. The Fund's underweight exposure to the belly of the curve was detracted from outperformance as 1-5-year yields rallied. While headline inflation has moderated, supply side disruption and tight labour conditions provide a challenging path for the RBA The Fund remains very marginally short of benchmark duration.
Credit spread tightening was the most substantial contributor to outperformance during the month more than offsetting the impact of the steepening yield curve The Fund's overweight exposure to credit was well rewarded during the month as domestic spreads rallied, supported by subdued primary market issuance and robust secondary demand. Exposure to domestic banks-most notably longer dated subordinated positions-contributed strongly to outperformance. Elsewhere, Non-financial corporate, utilities and real estate sectors were constructive
Sector and risk allocations were broadly maintained during the month. The Manager elected to increase exposure to government bonds marginally Exposure to issuers in the insurance and energy sectors were selectively trimmed. While the primary market was quiet, the fund did take part in a new CMBS deal from Think Tank which priced during July
While the outlook for credit has improved, the Manager remains conscious of the challenging macro environment and the risks associated with tightening financial conditions. The Fund is defensively positioned and the manager remains focused on identifying relative value opportunities presented as the outlook contine Windows improve.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-6.pdfJune, 2023
The Fund's robust running yield contributed to outperformance during the month. The Fund's allocation to nonfinancial corporates, domestic banks and RIMS were the strongest contributors to relative income return. The portfolio running yield at month end was 3.9% with the spread measured at 1.2%.
Duration positioning was the most substantial contributor to relative return over the month. Domestic yields rose sharply as investors priced in further RBA tate increases, while the curve flattened further, inverting for the first time since the GFC. The selloff in bonds led to a negative absolute performance for the month however the Fund's marginally short of benchmark duration mitigated the impact, contributing to outperformance. Curve positioning contributed to relative return as the Fund benefitted from its overweight exposure to the long end of the curve which was resilient relative to the belly.
Credit spread dynamics were mixed for performance. Domestic credit spreads narrowed slightly on aggregate while remaining in range of recent levels. Security selection was positive for outperformance with a number of off-benchmark and overweight positions across utilities and infrastructure performing well. As a result of its elevated exposure to credit, the Fund benefitted marginally from tightening swap spreads as rising government bond yields outpaced swap rates over the month.
Sector and risk allocations were actively adjusted during the month. The Manger elected to reduce exposure to government bonds throughout the month, adding to semi-government exposures in secondary. The Manager elected to invest in the record-breaking Westpac subordinated deal alongside new issues in the insurance and utilities sectors.
In line with the challenging outlook for credit. the Manager remains cognisant of risks and selective in purchase made. While the Fund has selectively added risk over the June quarter, the Fund remains defensively positioned while retaining the capacity to take advantage of relative value opportunities.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-5.pdfMay, 2023
The Perpetual Active Fixed Interest Fund in the month of May delivered a return of 40%. outperforming its benchmark by 02%.
The Fund's robust running yield contributed to outperformance during the month. The Fund's allocation to nonfinancial corporates. domestic banks and RMBS were the strongest contributors to relative income return. The portfolio running yield at month end was 3.6% with the spread measured at 1.1%
Duration positioning was the key contributor to outperformance during the month. Domestic yield moved higher over the month following the RBA's decision to increase rates al their May meeting. The inversion of the short end of the curve deepened as 1.3 year yields sold off sharply. While rising yields impacted absolute return. the Fund's short of benchmark duration positioning contributed to outperformance. Curve positioning was also construdive as the Fund benefitted from undenveight exposure to the very front of the yield cave.
Credit spread dynamics detracted from return. In a month of relatively benign spread movements. it is worth noting that the impact of scattered spread widening was more than offset by the contribution of both the Fund's running yield and duration positioning. The Fund's overweight exposut to non-financial corporates and Real Estate Investment Trusts detracted slighllyas these sectors underperformed. As a result of its elevated exposure to credit. the Fund benefitted marginally from tightening swap spreads as rising yields outpaced swap rates over the month.
The Manager was active in primary and secondary markets during the month and the Fund's credit risk was selectively increasedas the outlook improved slightly. The Fund's allocation to government bonds was reduced and the Manager elected to take part in a number of new corporate deals The Fund took part in new fixed r ale deals which included government adjacent issuer Australia Post. OIC shopping centre fund and energy network Ausnet Servtes ElseMiere. the Fund added exposure to domestic and offshore banks via new deals from ANZ. UBS and Credit Agricole.
The Fund remains defensively positioned while retaining the opacity to take advantage of relative value opportunities as the outlook improves
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-4.pdfFebruary, 2023
The Fund's robust running yield continues to contribute to outperformance. Allocation to non-financial corporates, domestic banks and securitised sectors were the strongest contributors to relative income return during the month. The portfolio running yield at month end was 3.6% with the spread measured at 1.1%.
Interest rate dynamics were the key determinant of absolute return over the month. Bond yields sold off as investors priced an extended monetary policy tightening cycle and higher terminal rates. The Fund benefitted from its slightly short duration position - relative to benchmark - as yields rose. Curve positioning was constructive as the Fund's underweight exposure to the very short end of the yield curve performed well as the curve flattened and inversion of 1-and-3 year yields deepened significantly. The Fund's duration was selectively lengthened during January, ending month in line with the benchmark.
The Fund's overweight allocation to Credit contributed to outperformance over the month as the credit spreads showed resilience in the face of rising discount rates. Domestic credit spreads tightened while remaining in range of recent levels and swap-to-bonds spreads also narrowed. The Fund's allocation to non-financial corporates, domestic banks and Real Estate Investment Trusts were the key contributors to credit spread return. As well as benefitting from the broader move tighter in spreads, security selection was also rewarded across non-financial corporates and property sectors.
The Manager was active in primary and secondary markets during the month, adding to domestic and offshore bank exposures while selectively trimming allocation to non-financial corporates. The Manager rotated exposures within the semi-government sector, selling a number of shorter dated issues and adding longer dated WA and SA state government bonds. The Fund remains defensively positioned while retaining the capacity to add risk should the outlook for credit continues to improve.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-3.pdfDecember, 2022
The Fund's robust running yield continues to contribute to relative return. The Fund's allocation to non-financial corporates, domestic banks and securitised sectors were the strongest contributors to relative income return during the month. The portfolio running yield at month end was 4.1% with the spread measured at 1.6%.
Rising bond yields was the key determinant of the Fund's negative absolute return during the month. Bond yields rose sharply over the final weeks of the year giving back a substantial portion of their gains since October. The Fund began the month marginally short of benchmark duration which contributed to outperformance as yields sold off. Over the course of the month, the Manager lengthened the fund's duration before ending the year in line with the benchmark.
The contribution of credit spread movements to outperformance was negligible during December. Credit spreads traded in a tight range, narrowing slightly over the course of the month. The Fund's overweight allocation to domestic bank paper was rewarded. As the credit outlook improves, the Manager is comfortable with the current credit exposure of the fund and its capacity to take advantage of upcoming opportunities.
Over the course of the month, the Fund benefitted from narrowing swap spreads. Swap spreads measure the difference between the government bond yield and the swap rate and is a component of return for fixed rate credit instruments. The Fund has elevated exposure to movements in swap spreads as a result of the overweight allocation to credit. Swap rates rose less than corresponding government bond yields during December, positively contributing to relative return.
Sector and risk allocations were broadly maintained during the month. Despite recent improvements in the credit outlook the manager remains cognisant of risks and selective in purchases made. Fund remains defensively positioned while retaining the capacity to add risk as the outlook for credit continues to improve.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-2.pdfNovember, 2022
The Fund's robust running yield continues to be a key contributor to relative return. The Fund's allocation to non-financial corporates, domestic banks and securitised sectors were the strongest contributors to relative income return during the month. The portfolio running yield at month end was 3.5% with the spread measured at 1.3%.
Credit spread dynamics were mixed for performance during the month. Financials outperformed, led by major bank spreads while non-financial corpore sectors corporate sectors saw widening. The Fund's overweight allocation to domestic banks performed well while allocation to property and REITs detracted. The Fund's small-long position in the Euro XOVER CDS index (which tracks European non-investment grade corporate issuers) contributed to relative performance as Euro denominated spreads rallied strongly during the month. As the credit outlook improves, the Manager is comfortable with the current credit exposure of the fund and its capacity to take advantage of upcoming opportunities.
Interest rate dynamics were positive for relative performance. Yields rallied over the month as the market priced in a slower rate of monetary tightening and a lower terminal cash rate. Curve positioning was constructive, the fund's overweight exposure to the belly (3-7 years) of the curve performed well as the yield curve flattened. The Fund remains slightly short of benchmark duration and underweight the short end of the curve.
A considerable contributor to relative return during the month was the Fund's exposure to swap spreads which retraced after widening sharply in October. The Fund has elevated exposure to movements in swap spreads as a result of the overweight allocation to credit.
Sector allocations were broadly maintained during the month. The Manager elected to liquidate a small number of short dated corporate bonds taking advantage of relatively stronger demand at the short end, reinvesting in longer dated government and semi-government issues. The Fund remains defensively positioned while retaining the capacity to add risk as the outlook for credit continues to improve.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp-1.pdfOctober, 2022
The Fund's robust running yield continues to contribute to relative return. Allocation to non-financial corporates and domestic banks were the most significant contributing sectors to relative income return during the month. The portfolio running yield at month end was 3.45% with the spread measured at 1.28%.
Credit spread widening slightly impacted relative return with non-financial corporates and domestic bank exposures detracting from performance. The Fund's underweight exposure to semi-government debt positively contributed to performance as semi spreads widened over the month. The current level of credit exposure in the portfolio remains consistent with our muted credit outlook. Currently there are no specific credit issuer exposures of concern.
The Manager elected to shorten duration slightly, taking advantage of the rally in yields during October. The Fund remains underweight the short end of the yield curve and overweight the belly (3-7 years). Duration positioning positively contributed to performance. The most substantial fa ctor detracting from relative return during October was the unusual significant widening of swap to bond spreads, widening over 20bps across the curve which was close to 50% of its starting level.
The Fund is overweight exposure to these spreads via credit holdings. Sector allocations were broadly maintained during the month. The Fund took part in new deals from ANZ and Cooperative Rabobank which offered attractive relative value and are indicative of the potential opportunities presented by recent spread widening. With a challenging outlook for credit and volatility in rates markets likely to continue, the Portfolio is defensively positioned and retains the capability to add risk at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/748_pfp.pdfSeptember, 2022
Rising interest rate were the most significant detractor from absolute return over the month. Bond yields sold off in reaction to the RBA's aggressive pace of rate increases and hawkish commentary from the Fed and other central banks. The RBA increased the target cash rate by 50bps for a fourth successive month in early September. The Fund remains close to benchmark duration however and the impact on relative return was benign. The RBA retains the ability to surprise markets and with the current tightening cycle having a fair way to play out, managing interest rate risks remains crucial. The Manager elected to keep the portfolio duration in line with the benchmark to limit the impact of policy implementation errors.
Credit spread widening detracted from performance during the month. Domestic spreads widened on aggregate as hawkish central bank rhetoric, slowing economic growth and tightening financial conditions weighed on credit markets. The Manager is confident in the current mix of credit and government securities. There are currently no credits of concern within the portfolio and the recent increases in interest rates and credit risk premia ensure that the portfolio receives attractive compensation for moderate levels of credit risk. During the month, the small negative credit spread performance was fully offset by the contribution of the Fund's running yield.
The Fund's robust running yield continues to contribute to relative return. Allocation to non-financial corporates and domestic banks were the most significant contributing sectors to relative income return during the month. The portfolio running yield at month end was 3.35% with the spread measured at 1.22%.
Sector allocations were broadly maintained during the month. With a challenging outlook for credit and volatility in rates markets likely to continue, the Portfolio is defensively positioned and retains the capability to add risk at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/192060980.pdfAugust, 2022
Interest rate duration management contributed to relative return over the month. Yields rose over the month, returning a portion of the gains made since mid-June. The RBA reiterated its dedication to their aggressive tightening cycle, including a 50bps interest rate increase early in the month. the Fund began the month marginally short of benchmark duration, then went shorter as the outlook for yields was higher. This positioning contributed materially Towards month end, the manager elected to bring portfolio duration in line with the benchmark. Credit spread dynamics contributed to relative performance during August. Domestic spreads were rangebound, ending the month marginally tighter on aggregate.
The Fund benefitted from its overweight exposure to credit. Allocation to non-financial corporates, domestic banks and utilities were the key contributors to credit spread return -financial corporates and domestic banks were the most significant contributing sectors to relative income return during the month. The portfolio running yield at month end was 3.17% with the spread measured at 1.19%. Sector allocations were broadly maintained during the month. The Manager was active in primary markets, taking part in a number of new deals in the domestic bank and non-financial sectors. Elsewhere, the Manager elected to trim non-financial corporate and semi-government exposures. With a challenging outlook for credit and volatility in rates markets likely to continue, the Portfolio is defensively positioned and retains the capability to add risk at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190873816.pdfJuly, 2022
Interest rate dynamics were constructive during July. Bond yields rallied on rising recession concerns and moderating monetary policy tightening expectations. Falling yields were the most significant determinant of absolute return as fixed rate bonds regained a portion of their year to date losses.
Curve positioning contributed to relative return as the domestic yield curve flattened. The Manager elected to reduce the Fun duration exposure, ending the d in a reduced terminal rate and a less aggressive RBA tightening cycle. With an easier tightening cycle fully priced in, the Manager remains cautious of further downside risk alongside policy error and execution risks. Credit spread dynamics detracted from relative return over the month.
Domestic credit spreads continued to grind wider during July although the rate of expansion slowed. The Portfolio maintains elevated exposure to credit relative to the benchmark which contributed to underperformance. The Manager is comfortable with the current defensive sector positioning between government and credit securities, which reflects the credit outlook while continuing to benefit from the yield premium osure contributing as swap spreads tightened. Income return continues to contribute to relative return, mitigating the impact of widening spreads. Allocation to non-financial corporates and domestic banks were the most significant contributing sectors to relative income return during the month. The portfolio running yield at month end was 3.02% with the spread measured at 1.21%. Sector allocations were broadly maintained during the month. The Manager remains selective in purchases made.
During the month, the Fund took part in a pair of new deals from Canadian banks that priced during the month. With a challenging outlook for credit and volatility in rates markets likely to continue, the portfolio is defensively positioned and retains the capability to add risk at attractive valuations.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/190038141.pdfJune, 2022
Interest rate dynamics detracted from relative performance over the month. Domestic yields rose sharply over the first two weeks of June before rallying over the second half on recession concerns. As evidenced by recent rate increases, both domestically and offshore, central banks maintain the capacity to surprise bond markets, a trend that is expected to continue. As such, the Fund remains in line with benchmark duration, with elevated exposure to the very short and long end of the -10 year tenors detracted from performance as the long end of the curve saw higher volatility relative to short end yields Income return continues to contribute to relative return, mitigating the impact of widening spreads and yield volatility. Allocation to non-financial corporates and domestic banks were the most significant contributing sectors to income return during the month. The portfolio running yield at month end was 2.97% with the spread measured at 1.15%.
Valuation indicators improved over the month while remaining slightly negative. Rising swap spreads were constructive for the outlook. The domestic credit market remains expensive relative to offshore markets across relative spread and basis swap indicators. The growth outlook is unchanged, remaining neutral. PMIs remain constructive but continue to weaken and global recession concerns rose over the month. Equity capital markets remain tight, detracting from the outlook. The most significant positive contributor remains the ratio of credit upgrades to downgrades, although US high yield is showing signs of slowing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/189403596.pdfMay, 2022
Their losses over the remainder of the contributed positively to relative performance over the month. As evidenced by recent rate increases, the RBA maintains the capacity to surprise bond markets, a trend that is expected to continue is expected to continue to add modest relative returns.
Credit spread widening was the key detractor from relative performance during May. Spreads continued to widen, impacted by growth and inflation concerns and elative performance as spreads widened over the month. A portion of the negative credit spread return was offset by the contribution of security selection in the Domestic bank sector. The current defensive sector positioning between government and credit securities reflects the credit outlook while continuing to benefit from the yield premium offered by bonds from high quality corporate issuers. Income return continues to contribute to relative return, mitigating the impact of widening spreads and yield volatility. Allocation to Non-financial corporates and domestic banks were the most significant contributing sectors to income return during the month. The portfolio running yield at month end was 2.8% with the spread measured at 1.1%. With a challenging outlook for credit and volatility in rates markets likely to continue, the portfolio is defensively positioned and retains the capability to add risk at attractive valuations
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/188422713.pdfApril, 2022
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.72% with the spread measured at 1.01%. Credit spread widening was the most significant contributor to underperformance during the month. Credit markets were impacted by expectation of tightening liquidity conditions and increasing discount rates alongside the broader volatility in financial markets. Credit spread performance was mixed by sector with -financial corporates and property sectors were the most significant detractors from relative return.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/187432218.pdfMarch, 2022
Bond markets saw elevated volatility and sold off sharply with the Bloomberg Ausbond Composite index posting worst month on record. The portfolio running yield at month end was 2.6% with the spread measured at 1.0%.
The credit outlook has improved and is now neutral. Despite recent spread widening, valuation indicators remain somewhat negative. Credit spreads have widened across US investment grade, high yield and domestic investment grade but remain in reach of recent average levels. Offshore spreads are offering more attractive value relative to the domestic market and the basis swap remains wide of recent averages both of which weigh on the valuation outlook. The growth outlook remains slightly positive, supported by the strong ratio of ratings upgrades to downgrades. PMIs remain robust but have continued to fall over recent periods. Elevated oil prices continue to detract from the overall credit outlook
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/186319450.pdfFebruary, 2022
Financial markets saw increased volatility as a result of increasing geopolitical instability alongside anticipation of monetary tightening. Throughout the month expectations of an aggressive tightening cycle from major banks weighed on valuations. Towards the end of February, financial markets were roiled by the invasion of Ukraine by Russia. While markets stabilised somewhat, the conflict has significant potential ramifications via central bank policy, energy prices and transition and exacerbated supply chain disruption.
Domestic credit spread widened in response to the geopolitical and monetary policy uncertainty. Corporate spreads outperformed financials as a result of lower sensitivity to geopolitical turmoil in some instances and a lighter issuance schedule. The busy month for major bank issuance impacted financials and other sectors closely correlated to the major bank curve such as RMBS. Domestic spreads were well supported by robust corporate earnings results which mitigated the impact of geopolitical and central bank policy uncertainty. Australian Dollar spreads were more resilient than offshore with US Dollar spreads widening further. Euro Spreads were the hardest hit, seeing a sharp expansion following the invasion of Ukraine. European banks are more sensitive to the economic sanctions placed on Russia and Europe remains reliant on Russian energy.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/185154559.pdfJanuary, 2022
The credit outlook remains marginally positive. Valuation indicators are benign. Concerns surrounding the Omicron variant and a more hawkish stance from the Fed have contributed to widening spreads across US investment grade, high yield and AU investment grade. The basis swap has normalised and is no longer detracting from the overall credit outlook. The growth outlook has moderated while remaining slightly positive. PMIs while remaining robust have fallen from their 2021 highs. The recent spike in the oil price is expected to weigh on the outlook. Credit quality expressed by the ratio of upgrades to downgrades continues to strongly contribute to the overall outlook.
Demand and supply indicators have further cooled and are now neutral. Market demand has been more selective than recent months, with a number of new deals trading wider than issue by month end. Technical indicators are marginally negative for the overall credit outlook. Investor and intermediary cash balances are very low relative to historical levels, weighing on the outlook for credit spreads. The team will continue to monitor technical and supply demand indicators to identify inflection points in investor risk sentiment.
The credit outlook has tempered recently as credit markets face risks in the form of central bank tapering and the Omicron variant. At the end of a long rally in spreads, the credit outlook remains supported by positive macroeconomic indicators while valuation, technical, and supply and demand indicators have moderated.The portfolios are well positioned to continue to deliver income and defend capital in these conditions.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/183930979.pdfDecember, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.30% with the spread measured at 0.75%.
Interest rate dynamics were constructive for relative performance during the month. The yield curve steepened as the very long and very short end of the curve sold off. The fund remains only marginally below benchmark duration. The Fund benefitted from the retracement of swap spreads during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/182706785-1.pdfNovember, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.30% with the spread measured at 0.72%. Interest rate dynamics were predominantly benign for performance during the month. Long term yields regained a portion of their recent losses and the yield curve continued to flatten over the month. The fund remains only marginally below benchmark duration. A significant factor detracting from performance during the month was the widening of swap spreads. Swap spreads measure the difference between the government bond yield and the bank bill swap rate and is a component of of month-to-month swap spread volatility is increased. Credit spread dynamics were broadly positive for relative performance during November. Australian Dollar spreads led by major banks widened on aggregate on Omicron concerns and increasing expectations of central bank tightening. Spread performance was mixed by sector with domestic banks and RMBS detracting from performance. Allocation to and security selection within the non-financial corporate sector were the most significant contributing factors to credit spread return. Risk allocations were actively managed over the month. The manager took the opportunity reduce credit risk in the portfolio trimming exposure to BBB corporates and increasing allocation to mid-long term government bonds. Primary market activity was subdued during the month. The Manager elected to take part in the new $300M sustainability linked bond from Optus. The deal represented attractive relative value in a sector that continues to see robust demand.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/182424296.pdfOctober, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.24% with the spread measured at 0.73%.
The credit outlook has moderated slightly but remains positive. Valuation indicators have turned slightly negative. Spreads extremely tight relative to historical averages. The 5y Basis swap moved materially wider during the month which dragged on the valuation outlook. The widening basis swap makes the AUD credit market more attractive for issuers and less attractive for offshore investors, and is expected to weigh on spreads.
The growth outlook remains strongly positive. Supply chain disruption continues to impact economic growth expectations as seen in a number of falling global PMIs(albeit from high bases). While growth expectations remain robust, they have cooled over the month. The accessibility of equity capital as seen in the strong IPO pipeline remains supportive for spreads. The ratio of credit upgrades to downgrades remains positive for spreads but is expected to moderate slightly while increased M&A activity may provide a headwind for credit quality.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/180946038.pdfAugust, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.22% with the spread measured at 0.65%
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/179138570.pdfJuly, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. The most significant contributing sectors to income return were nonfinancial corporate and domestic banks. The portfolio running yield at month end was 2.22% with the spread measured at 0.62%. Domestic yields rallied through July as the spread of the delta variant and the potential for a delay to monetary tapering saw investors move to reduce risk.
While the at interest rate movements detracted -curve outperformed while the long end steepened. The Fund remains slightly short of benchmark duration and overweight the one and ten-year tenors. The impact of interest rates movement on relative performance was offset by the contribution of credit spread tightening. On aggregate, domestic spreads wererangebound, remaining resilient despite increasing COVID-19 concerns. While credit spread tightening was slightly mixed across s ectors, security selection waspositive for outperformance. Security selection in the non-financial corporate, utilities and semi-government sectors contributed to outperformance.
With many credit spreads tighter than their pre-COVID levels, active management remains crucial to identifying relative value opportunities in the credit space. Sector allocation was actively managed over the month. The manager elected to trim the allocation to domestic banks, reducing exposure to subordinated tranches of regional bank debt. Exposure to RMBS was increased during the month. The RMBS sector continues to offer competitive relative value opportunities, and the Fund was able to increase both its credit quality and running income by investing in top tranches of a number of recent RMBS deals. Securitisation issuance remains robustin contrast to reduced volumes in the corporate primary market.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/176022664.pdfJune, 2021
The portfolio continued to collect running income in excess of the benchmark. This contribution to positive carry was primarily associated with allocations to nonfinancial corporates and domestic banks. Allocations to non-bank financials and utilities also contributed to income return.
perform well in an environment of low yields and expectations of rising rates. Credit spreads continued their steady grind tighter during June. Credit spread returnwas led by non-financial corporates, domestic banks and property. Portfolio allocation to the energy sector performed particularly well as the oil price continued its extended rally. Portfolio running yield at month end was 1.42% with the spread measured at 0.56% above the benchmark.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/174988404-1.pdfApril, 2021
The portfolio collected running income in excess of the benchmark across all corporate sectors. Non-financial corporates were the most significant contributors to income return. The portfolio running yield at month end was 1.39% with the spread measured at 0.55% above the benchmark. Credit spread dynamics were positive for relative performance. Credit spreads tightened on aggregate, reflecting strengthening global growth expectations and robust corporate earnings results. The key contributing sector was non-financial corporates with corporate spreads outperforming financials on aggregate over the month. Recently entered positions in West connex and Lend Lease bonds - both issued during March - were the top contributors to return.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/172126895.pdfNovember, 2020
The portfolio collected running income in excess of the benchmark across all corporate sectors. Non-financial corporates were the most significant contributors to income return. The portfolio running yield at month end was 1.39% with the spread measured at 0.94% above the benchmark. Credit spread tightening was the main contributor to outperformance during November. Credit spreads tightened significantly following well received vaccine news, US election results and monetary policy easing.
Credit spread tightening was broad based with contributions from non-financial corporates, non-bank financials, domestic and offshore banks. Interest rate dynamics slightly detracted from relative performance. Yields rose as bonds sold off following the positive vaccine news. This was in spite of the RBA's decision to cut the 3-year yield and cash rate targets and commence quantitative easing. The yield curve steepened as the front end remained relatively stable while longer tenors sold off. Swap spreads rose out of negative territory, which also detracted slightly from outperformance. During November, the manager took the opportunity to increase the portfolio's credit exposure, trimming government debt exposure. Primary market issuance was active throughout the month. The manager elected to take part in Ampol's hybrid deal which was met with robust demand. The Portfolio invested in Bend lgo and Adelaide Bank's $65o million senior unsecured deal which represented the first significant senior unsecured issuance from anAustra I ian bank since February 2020. Senior issuance has been very subdued since the RBA's Term Funding Facility was established. The portfolio also took part in NBN Co's 5-year, $1.2B inaugural issuance in late November.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/162499901.pdfticker: PER8045AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://www.perpetual.com.au/~/media/perpetual/fund-profiles/748_pfp.ashx
https://www.perpetual.com.au/pricing-and-performance/?class=4&class=6&class=5&class=12&product=3&text=#fund-listing-modal-PIFHAA
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Bonds - Australia
peer_benchmark: Fixed Income - Bonds - Australia Index
broad_market_index: Australian Bond Composite 0-10Y Index
structure: Managed Fund
fund_features:
Perpetual Active Fixed Interest Fund A aims to provide investors with regular income by investing in fixed income securities, primarily corporate bonds. To outperform the stated benchmark on an ongoing basis before taxes and fees. Diversifying the Fund amongst different securities issued by various borrowers, actively managing for changes in market wide and security specific credit margins, identifying and investing in relative value within the universe of credit securities. Derivatives are utilized in the management of the Fund.
- Manager Address : Angel Place Level 18 123 Pitt Street Sydney NSW 2000
- Phone : (02) 9229 9000
- Website : https://www.perpetual.com.au/
- Contact Email : investments@perpetual.com.au