High yield returns from Aussie bank bonds?

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In December, Coolabah Capital Investments launched its new Floating-Rate High Yield strategy, which focuses on generating higher income than other traditional fixed income investments by investing in a portfolio of investment-grade Australian Floating-Rate Notes (FRNs) with enhanced yields.

Coolabah’s Floating-Rate High Yield strategy is currently invested in a portfolio of Australian dollar bank and insurer issued senior-ranking and Tier 2 floating-rate notes with an average A- credit rating. As of 21 February 2023, it had an annual yield to maturity of 8.67% p.a. after fees that has been enhanced by applying gearing.

Coolabah’s Floating-Rate High Yield strategy does not invest in equities, hybrids, foreign issued bonds, or fixed-rate bonds. It is exclusively focussed on Australian-issued bonds that are floating-rate and which are either senior-ranking or Tier 2 (subordinated), both of which sit above hybrids in the capital structure. It uses leverage to enhance returns, which also amplifies downside risks.

Coolabah applies bottom-up and top-down fundamental analysis of issuers of the securities and the credit quality and structural features of the securities themselves to build a portfolio of Australian bonds that offer attractive yields whilst minimising default risks.

Disclaimer: The yield displayed for the Coolabah Floating-Rate High Yield Fund (Managed Fund) is the annual yield to maturity after management costs. The bond yields shown are the yields to maturity. The yields shown are as of the date displayed and assumes the Fund holds the bonds to maturity or call which may or may not occur. If the Fund does sell its bonds prior to maturity, it is expected it will reinvest in similar issues. This yield to maturity changes daily and may be different on the day you invest. All investments carry risks, including that the value of investments may vary, future returns may differ from past returns, and that your capital is not guaranteed. The Fund has a different risk profile to the other comparisons, including, amongst other things, that it invests in bonds, not hybrids or equities, and that it uses leverage, which means that both gains and losses may be amplified. This has been prepared by Coolabah Capital Investments (Retail) Pty Ltd ACN 153 555 867 (Coolabah), an authorised representative (#000414337) of Coolabah Capital Institutional Investments Pty Ltd ABN 85 605 806 059 AFSL 482238, to provide you with general information only. In preparing this publication, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. The Product Disclosure Statement (PDS) and Target Market Determination (TMD) for the Fund should be considered before deciding whether to acquire or hold units in it. A PDS and TMD can be obtained by visiting www.coolabahcapital.com. Equity Trustees Limited (Equity Trustees) ABN 46 004 031 298 AFSL 240975, is the responsible entity for the Coolabah Floating-Rate High Yield Fund (Managed Fund). Equity Trustees is a subsidiary of EQT Holdings Limited ABN 22 607 797 615, a publicly listed company on the Australian Securities Exchange (ASX: EQT). Neither Coolabah, Equity Trustees nor any of their related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. The Fund is subject to investment risks, which could include delays in repayment and/or loss of income and capital invested. Livewire gives readers access to information and educational content provided by financial services professionals and companies ("Livewire Contributors"). Livewire does not operate under an Australian financial services licence and relies on the exemption available under section 911A(2)(eb) of the Corporations Act 2001 (Cth) in respect of any advice given. Any advice on this site is general in nature and does not take into consideration your objectives, financial situation or needs. Before making a decision please consider these and any relevant Product Disclosure Statement. Livewire has commercial relationships with some Livewire Contributors.

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