Big Duration Short Delivers

Christopher Joye

In The AFR I evaluate the "big interest rate duration short" and find that it has delivered in spades with the value of a AAA rated portfolio of Australian government bonds suffering a savage, two standard deviation plus loss of more than 2 percentage points (in total return terms) since the start of September as long-term rates embark on their journey towards normalistion---yes, it is actually happening. While on the subject of risk, I segue into the scandalous question of why neither APRA nor Treasury require Australian super funds to report any regular volatility or risk metrics at all---despite forcing workers to commit almost one-tenth of their income to super---and instead compel savers to predicate 100% of their performance evaluation exclusively on super funds' raw returns, which leads to skew-if asset-allocation that is biased to high returning sectors like equities and commercial property that have poor risk-adjusted performance characteristics (I've even included some subtle portfolio optimisation analysis for the technically minded). Free (VIEW LINK)


Christopher Joye

Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.

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