INVESTMENTS | FUND COMMENTARY
Fixed Interest Fund
The Fixed Interest Fund (Wholesale) (the ‘Fund’) fell 3.91% (net of fees) in the quarter ending 30 June 2022, underperforming its benchmark which fell 3.81%. The Fund fell 10.92% (net of fees) for the 2022 financial year, underperforming its benchmark which fell 10.51%.
25 July 2022
Fund commentary
The last 12 months has seen an about-face in monetary policy, with central banks pivoting from highly accommodative settings, utilising extraordinary policy tools, to outright hawkish and hiking cash rates as inflation proved more persistent than anticipated. This has seen a significant rise in yields and a challenging environment for bond portfolios.
Yields pulled back from mid-June, when the Australian 10yr traded briefly above the 4% level. This was due to concerns central banks would not be able to engineer a benign outcome in their responses to inflation, and markets began to consider the potential for a recession.
Outlook for the Fund
The Fund seeks to deliver a return that is in line with its benchmark, the Bloomberg Ausbond Composite Bond Index 0+ Years. The Fund is currently positioned with a neutral duration relative to this benchmark, with aggregate government bond and credit allocations at benchmark weights to deliver the risk-return characteristics of this benchmark within an ethically screened investment universe.
With Central Bank’s highly active, market volatility is expected to continue in response to economic data releases, particularly the monthly inflation reads in the US. While some commodity prices have recently declined from their highs, this has not yet been visible in inflation data and inflation to date has persisted well above target.
With this backdrop, markets can be expected to continue to oscillate between anticipating further central bank responses to the data and pushing yields higher, while then anticipating a slowdown or possible recession in the economy, necessitating a loosening in monetary policy.
Fixed Interest (Wholesale) Fund Performance
As at 30 June 2022*
| fund | benchmark | |
|---|---|---|
| 3 months | -3.9% | -3.8% |
| 1 year p.a. | -10.9% | -10.5% |
| 3 years p.a. | -3.0% | -2.6% |
| 5 years p.a. | 0.4% | 0.9% |
| since inception p.a. | 2.0% | 2.5% |
*Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 14/06/2012.
Fixed Interest (Retail) Fund Performance
As at 30 June 2022*
| fund | benchmark | |
|---|---|---|
| 3 months | -4.0% | -3.8% |
| 1 year p.a. | -11.1% | -10.5% |
| 3 years p.a. | -3.3% | -2.6% |
| 5 years p.a. | -0.1% | 0.9% |
| 10 years p.a. | 1.7% | 2.6% |
| since inception p.a. | 1.8% | 2.6% |
*Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 14/06/2012.
With Central Bank’s highly active, market volatility is expected to continue in response to economic data releases, particularly the monthly inflation reads in the US.
Fund strategy
Australian Ethical offers investors the opportunity to invest in a diversified portfolio of interest-bearing investments generating income. The Fixed Interest Fund is invested in primarily fixed rate bonds, from issuers such as the Commonwealth and State Governments, banks and other corporate issuers that meet the Australian Ethical Charter. The Fund aims to match the return of the UBS composite bond index.
*Total returns are calculated using the sell (exit) price, net of management fees and gross of tax as if distributions of income have been reinvested at the actual distribution reinvestment price. The actual returns received by an investor will depend on the timing, buy and exit prices of individual transactions. Return of capital and the performance of your investment in the fund are not guaranteed. Past performance is not a reliable indicator of future performance. Figures showing a period of less than one year have not been adjusted to show an annual total return. Figures for periods of greater than one year are on a per annum compound basis. The current benchmark may not have been the benchmark over all periods shown in the above chart and tables. The calculation of the benchmark performance links the performance of previous benchmarks and the current benchmark over the relevant time periods.
This commentary may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, Australian Ethical accepts no responsibility for the accuracy or completeness of, nor does it endorse any such third party material. To the maximum extent permitted by law, we intend by this notice to exclude liability for this third party material.