Superior returns without duration risk

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The driver of a large amount of fixed-income performance over the last decade has been the secular decline in long-term interest rates. In Australia, the 10-year government bond yield averaged approx. 5.8% over the 10 years to 2008. Since that time it has averaged just 3.2% (and is currently 1.6%) as central banks have crushed cash rates and bought government bonds, bidding up their prices and reducing yields.

As long-term interest rates creep higher again because of concerns about inflation, bond market performance has suffered. The AusBond Composite Bond Index lost 2.8% over the 12 months to February 2021, posting negative returns every month since October.

In February 2021, the index was down 3.6%. Coolabah Capital Investments' investment process does not use duration, or interest rate risk, as a source of returns. Coolabah's zero years duration Long Short Credit Fund has returned 7.1% to 7.3% net of all fees over the year to January 2021, outperforming peers and the main Aussie fixed-income benchmarks.

Despite the duration-induced bond price falls in February 2021, the Long Short Credit Fund reported positive returns of 0.37% to 0.38% net of fees in the month. 

Since inception, it has returned 5.3% to 5.4% annually after fees with 3.2% annual volatility, representing an excess return above the RBA's cash rate of 4.3% to 4.4% annually after fees.

The daily liquidity Long Short Credit Fund's current average credit rating is AA-.

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Christopher Joye 

Investment Disclaimer Past performance does not assure future returns. 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. This information has been prepared by Coolabah Capital Investments Pty Ltd (ACN 153 327 872). It is general information only and is not intended to provide you with financial advice. You should not rely on any information herein in making any investment decisions. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The Product Disclosure Statement (PDS) for the funds should be considered before deciding whether to acquire or hold units in it. A PDS for these products can be obtained by visiting Neither Coolabah Capital Investments Pty Ltd, EQT Responsible Entity Services Ltd (ACN 101 103 011), Equity Trustees Ltd (ACN 004 031 298) nor their respective shareholders, directors and associated businesses assume any liability to investors in connection with any investment in the funds, or guarantees the performance of any obligations to investors, the performance of the funds or any particular rate of return. The repayment of capital is not guaranteed. Investments in the funds are not deposits or liabilities of any of the above-mentioned parties, nor of any Authorised Deposit-taking Institution. The funds are subject to investment risks, which could include delays in repayment and/or loss of income and capital invested. Past performance is not an indicator of nor assures any future returns or risks. Coolabah Capital Institutional Investments Pty Ltd holds Australian Financial Services Licence No. 482238 and is an authorised representative #001277030 of EQT Responsible Entity Services Ltd that holds Australian Financial Services Licence No. 223271. Equity Trustees Ltd that holds Australian Financial Services Licence No. 240975. Forward-Looking Disclaimer This presentation contains some forward-looking information. These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements. Although forward-looking statements contained in this presentation are based upon what Coolabah Capital Investments Pty Ltd believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Coolabah Capital Investments Pty Ltd undertakes no obligation to update forward-looking statements if circumstances or management’s estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking statements.

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