by
FIIG Securities | Oct 04, 2024
As we celebrate the one-year anniversary of the FIIG Australian Bond Fund, we're pleased to announce that the Fund has delivered an impressive 7.53% net return since inception, outperforming its benchmark by 0.41% (after fees). This achievement is a testament to our Investment Management Team's rigorous investment process and strategic approach.
12-Month Performance Highlights
- Generation of significant capital gains across all assets held given a significant rally in interest rates.
- The Fund predominantly held longer duration than the index across the year, allowing generation of excess capital gains over and above the index returns throughout the rally.
- As the rally exhausted, dilution of exposure to a high percentage of long duration Federal and State Government debt into increased medium-term diversified credit exposure.
Key Portfolio Contributors
Whilst portfolio performance is a function of all assets and their collective contribution to both portfolio total modified duration (term) and credit (yield excess margin) exposure, key holdings that significantly contributed to the FIIG Australian Bond Fund's success include:
- Australian Commonwealth Government 3.75% 21 April 2037
- NSW Treasury Corporation 3.50% 20 March 2034
Each asset was held in a significant portfolio exposure weighting in excess of the index, and each contributed heavily to the portfolio modified duration and subsequent capital gains.
Please visit the Fund microsite to view the latest portfolio composition. The update for September will be added in mid-October. Please click here to visit the Fund microsite.
Outlook
Investors in the FIIG Australian Bond Fund have, and continue to be, well positioned to capitalise upon anticipated falls in interest rates, a direction justified by continued weak domestic economic growth, falling inflation and rising unemployment. As discussed within the FIIG 2024 Macro Outlook, the timing of eventual moves lower in the RBA's Official Cash Rate are debatable, yet the bond market has moved quickly in anticipation of eventual easier monetary policy, progressively pricing long dated bonds lower in yield since late 2023. The Fund Manager has historically implemented an investment strategy to take advantage of this direction, a trend he believes will continue.
The FIIG Australian Bond Fund, with its exposure benchmarked to the longer duration and market-leading 'Bloomberg Ausbond Composite 0+ Yr Index', is strategically aligned to benefit from this expected decline in interest rates. The longer the duration of a bond, the more sensitive its price change as a function of a fall in yield. As yields fall, bond prices will rise, and the longer the bond, the greater the rise. By investing in longer dated bonds before their yields fall to anticipated lower levels, investors are advantageously positioned, having locked in a higher reinvestment position that would not otherwise be available. Further, as the anticipated economic slowdown continues to unfold, the diversified exposure to high-quality investment grade holdings within the FIIG Australian Bond Fund will continue to protect investors from any adverse credit conditions that may emerge.
We are confident in our ability to continue delivering exceptional results and value to our investors.
FIIG Investment Management Team
Head of Investment Management
Kieran Quaine
Kieran has in excess of 35 years’ experience in senior roles in the fixed income market, primarily as a fund manager in charge of investing multiple billions of dollars across a wide and complex range of Investment Mandates. His experience includes roles as a US Investment Bank proprietary interest rate trader, as a debt originator, syndicator and institutional client relationship manager. Kieran has worked at FIIG Securities for over 15 years, including the last 9 years as Head of the Managed Income Portfolio Service (MIPS), developing the Individually Managed Account (IMA) business with Megan Romeo. Kieran has a BA (Accounting) from Canberra University and is a former Chairman of the AFMA Debt Capital Markets Committee.
Kieran is the Portfolio Manager for the FIIG Australian Bond Fund.
Head of MIPS, Portfolio Manager - IMAs
Megan Romeo
Megan has in excess of 15 years’ experience in the Asia Pacific fixed income markets. Before joining FIIG in 2015, Megan worked for Standard & Poor’s Capital IQ, tailoring technically complex data and algorithm solutions for clients across the Asia Pacific. Megan holds a Bachelor of Science (Hons) in Quantum Physics and a Diploma of Financial Services (Securitisation). Her mathematical and statistical data analysis skillset, and development of trading and allocation algorithms, has been instrumental in the generation high alpha returns within all MIPS products, and the emerging equivalent record for the FIIG Australian Bond Fund.
Portfolio Manager - FIIG Monthly Income Fund
Garreth Innes
Garreth has over 15 years’ of extensive experience in financial markets, including portfolio management roles with multi asset class exposure. He has individually managed significant volumes of capital invested in the fixed income asset class across a complex array of Investment Mandates and has led teams of analysts and junior managers. Garreth has additionally been a member on Tactical Asset Allocation committees and has successfully launched and managed an Australian Dollar Income Bond Fund for Asian clients. Garreth holds a Master’s Degree in Finance (UNSW) and is a CFA Charter holder.
To find out more about the FIIG Australian Bond Fund or to Invest, please click here
