Fixed Interest Fund
The return of the Australian Ethical Fixed Interest Fund (Retail) (the ‘Fund’) for the year ended 30 June 2023 was 0.8%, 0.4% behind the 1.2% return of the benchmark Bloomberg Ausbond Composite Bond Index 0+. Wholesale units in the Fund delivered a return of 1.0% net of fees.
The negative return for the fourth quarter of the financial year was attributable to rising yields. The rise in yields reversed the falls seen over March 2023 following the collapse of Silicon Valley Bank and other regional banks in the United States. The Australian 10y yield, which had fallen 0.51% over the month of March, rose 0.71% over the June quarter. As the perceived risk of ongoing issues in the US banking sector receded, market focus returned to the need for central banks to continue tightening policy. It is accepted that the post-pandemic inflation peak has passed, but it remains unclear whether inflation with return to central bank target levels, with services inflation a particular focus both in the US and in Australia. Employment outcomes in both countries have run ahead of expectations through the quarter, with the May outcome for Australia driving a decline in the unemployment rate back to 3.6% despite RBA expectations it will end 2023 at 4.0% as the economy cools.
The Fund has ended the June quarter with a neutral duration position, accepting market pricing for the risk of additional RBA hikes over the latter half of 2023, but way of the aggressive cuts to policy priced for the US and any move higher in yields that may stem from trimming those expectations should economic data continue to surprise to the upside.
Fixed Interest (Wholesale) Fund Performance
As at 30 June 2023*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -3.0% | -2.9% |
| 1 year p.a. | 1.0% | 1.2% |
| 3 years p.a. | -3.8% | -3.5% |
| 5 years p.a. | 0.1% | 0.5% |
| since inception p.a. | 1.9% | 2.4% |
^Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 15/01/2014.
Fixed Interest (Retail) Fund Performance
As at 30 June 2023*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -3.1% | -2.9% |
| 1 year p.a. | 0.8% | 1.2% |
| 3 years p.a. | -4.1% | -3.5% |
| 5 years p.a. | -0.3% | 0.5% |
| 10 years p.a. | 1.4% | 2.4% |
| since inception p.a. | 1.7% | 2.4% |
^Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance.
Inception date: 14/06/2012.
It is accepted that the post-pandemic inflation peak has passed, but it remains unclear whether inflation with return to central bank target levels, with services inflation a particular focus both in the US and in Australia.
*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.
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