Fixed Interest Fund
Outlook for the fund
The Fund retains a neutral duration position, with modified duration at 4.95 vs the index at 4.95, and the yield to maturity at 4.19%. We believe that market pricing for future hikes from the Reserve Bank of Australia (RBA) is close to fair levels, and remain neutral with a bias to add duration should yields move higher from here. The Fund seeks to offer true-to label, ethically screened exposure to the Australian fixed income market.
Commentary for the quarter ended March 2024
The Fixed Interest Fund (Wholesale) (the ‘Fund’) returned 1% net of fees in the quarter ended 31 March 2024, matching its benchmark which also returned 1%.
Yields were little changed across the quarter, with the two-year yield closing 5 basis points higher than the end of December as expectations of RBA rate cuts pushed further toward the back end of 2024, and the 10 year yield closing unchanged vs December at 3.96%. Markets had ended 2023 buoyed by the mid-December confirmation that US Federal Reserve anticipated cutting the Fed Funds rate in 2024. Data in the march quarter was mixed, with employment outcomes showing ongoing strength in the economy, contrary to some rate-cut narratives.
The fund remained neutral through the March Quarter, with a small overweight allocation to front end credit relative to the index.
Fixed Interest (Wholesale) Fund Performance
As at 31 March 2024*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 1.0 | 1.0 |
| 1 year p.a. | 1.1 | 1.5 |
| 3 years p.a. | -1.6 | -1.3 |
| 5 years p.a. | -0.2 | 0.2 |
| since inception p.a. | 2.2 | 2.7 |
^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 31 March 2024*
| fund | benchmark^ | |
|---|---|---|
| 3 months | 0.9 | 1.0 |
| 1 year p.a. | 0.9 | 1.5 |
| 3 years p.a. | -1.8 | -1.3 |
| 5 years p.a. | -0.5 | 0.2 |
| 10 years p.a. | 1.5 | 2.6 |
| since inception p.a. | 1.9 | 2.7 |
^Benchmark: Bloomberg Ausbond Composite Bond Index 0+ Years. Past performance is not a reliable indicator of future performance..
Inception date: 14/06/2012.
Portfolio Changes
Additions to the Fund
-
Brisbane Airport Corp April 2025 – Brisbane Airport issued a longer duration bond in the March Quarter, with the fund preferring short duration credit we picked up this line in the secondary market.
-
NSW Treasury Corporation 2037 – NSW issued a new long-duration bond that joined the index at the end of March. The fund participated in order to maintain a benchmark relative weight to this duration and issuer.
Reductions from the Fund
-
Commonwealth Government April 2024 Maturity – The approaching maturity of this bond sees it exit the benchmark index at the end of March.
-
Commonwealth Government November 2024 – Sold down in order to reallocate to short-duration credit.
Data in the March quarter was mixed, with employment outcomes showing ongoing strength in the economy, contrary to some rate-cut narratives.
Sector allocation
Sector overweights
Semi-Government, Credit, SSA
Sector underweights
Treasury
*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.
Fund updates