Fixed Interest Fund
Fund commentary
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Yields closed the quarter higher, with the 10-year bond rate rising 0.22% to 3.88%, but the path was non-linear and volatile.
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In the month of July, yields fell as expectations of highly aggressive central bank policy (hikes of +1% at a single meeting for the Federal Reserve or 0.75% for the Reserve Bank of Australia) were unwound. Markets had been buoyed by the possibility of a slowing in the pace of rate hikes after Jerome Powell, the chair of the Federal Reserve, suggested rate rises to July had seen the cash rate reach some members’ estimates of neutral.
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In August however, this move reversed, as Fed speakers emphasised the fight against inflation was ongoing and the cash rate would need to move into outright restrictive territory, with Powell later shifting language to highlight the probability of some “pain” ahead for households and businesses.
Fixed Interest (Wholesale) Fund Performance
As at 30 September 2022*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -0.7% | -0.6% |
| 1 year p.a. | -11.8% | -11.4% |
| 3 years p.a. | -3.8% | -3.4% |
| 5 years p.a. | 0.3% | 0.8% |
| 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 September 2022*
| fund | benchmark^ | |
|---|---|---|
| 3 months | -0.7% | -0.6% |
| 1 year p.a. | -11.9% | -11.4% |
| 3 years p.a. | -4.1% | -3.4% |
| 5 years p.a. | -0.2% | 0.8% |
| 10 years p.a. | 1.5% | 2.3% |
| 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.
In the month of July, yields fell as expectations of highly aggressive central bank policy (hikes of +1% at a single meeting for the Federal Reserve or 0.75% for the Reserve Bank of Australia) were unwound.
Portfolio changes
Additions to the Fund
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University of Melbourne August 2029 Green Bond: The Fund has supported bond issues from other universities in the past and was happy to include this issue from the University of Melbourne, with the bond (like those of other universities before it) funding ongoing works to invest in the future of tertiary education.
Reductions from the Fund
None
Sector allocation
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Sector overweights: SSA, Treasury, Cash
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Sector underweights: Credit, Semi Government
Outlook for the Fund
The Fund remains neutral duration, with modified duration at 5.16 vs the index at 5.20, and the yield to maturity at 3.97%. We believe that market pricing for future hikes from the Reserve Bank of Australia is close to fair levels, and will remain neutral, particularly considering ongoing market volatility. The Fund seeks to offer true-to label, ethically screened exposure to the Australian fixed income market.
We believe that market pricing for future hikes from the Reserve Bank of Australia is close to fair levels, and will remain neutral, particularly considering ongoing market volatility.
*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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