TOL - 9th Jun, 2026
Yields with a 7 in front of them: Daintree's Justin Tyler on the "exciting" time for fixed income
Fixed income is offering a "wealth of opportunities" but investors still need to be smart.
Add us as a preferred Google source
Please note this interview was filmed on 19 May 2026.
The stars can often align in unexpected ways in markets, and for fixed income investors, right now feels like one of those times.
For Daintree Capital Director and Portfolio Manager Justin Tyler, it's a welcome development, given the sector has struggled in some regards since Covid reset the conventional rules.
"Fixed income is an exciting opportunity now, more so than it's been for quite a while."
And there are two confluent, but independent, factors behind this, says Tyler, namely higher cash rates driving yields and relatively-favourable treatment from the proposed changes to capital gains tax.
In this interview for Livewire's Income Series, Tyler breaks down how Daintree are looking to capitalise on the "wealth of opportunities" in income markets, whilst also highlighting the risks investors need to avoid if they want to make the most of the moment.
Unpacking the opportunity
As a floating rate investor, the equation is straightforward for income funds like Daintree. Higher rates mean higher yields and more interest from investors.
"We don't hold a lot of fixed rate exposure in our funds," he says. "That means our return is basically linked to the cash rate. And so as the cash rate increases, we've got higher running yields and obviously that's attractive to investors."
We're reaching a point now where fixed income yields are in the same territory as expected long-term equities returns, and that's an opportunity that should be on investor radars.
"If you think about the investment-grade fixed income universe at the moment, there are assets that you can buy, and indeed portfolios that you can buy that have yields with a seven handle in front of them," says Tyler.
"And if you think about what most people expect out of equities over long periods of time, it's probably an expected return of seven something, maybe eight something."
These higher yields have come at a time when many investors will be giving serious thought to how their portfolio construction may need to change under the changes to capital gains tax proposed in the recent Budget. The move from a CGT discount to an indexation model brings the attractiveness of income in line with capital gains.
"The other element more recently is the proposed [CGT] tax changes," says Tyler. "What they do is make the taxation treatment of capital gains and income more closely aligned."
The bottom line is fixed income investors can right now get equity-like returns with less risk and equitable tax treatment.
"You're not giving up much, if anything, to move to fixed income, but what you are doing is reducing the risk you take because it's a more defensive asset class. And in terms of after-tax returns, you're not being penalised as much as what you were."
So if returns between some growth assets and fixed income are now broadly more comparable, it's understanding what actually drives those returns that sets the opportunity in income apart right now.
In fixed income, returns are actually driven by income, says Tyler. "If you take a Daintree fund as an example, we would earn anything from 50-to-60 basis points of coupon income every month," he says.
"What that gives you is a lot of resilience. It means that if something happens such that the price of our bonds might fall, you have to eat through that 50 basis points of coupon income first before you see a drawdown."
At a time when investors are likely highly-attuned to the downside risks of stretched equities markets, income offers an attractive sanctuary for retirees and other investors.
"No one likes volatility and no one likes drawdowns, but for people who are particularly sensitive to that, fixed income now is a great place to be because of that resilience, but of course also because the expected returns are higher than what they were," Tyler says.
"Investors can take risk off the table without necessarily forgoing much in the way of return."
Duration and rate risk
Despite the favourable conditions, Tyler says there's still aspects of the fixed income landscape investors might wish to avoid, specifically around duration and interest rate risk.
"We are cautious around duration risk," says Tyler. "We're a floating rate manager and that caution is borne out of the role that fixed income should play in investor portfolios. Income generation is obviously one of those, but also defensiveness against growth assets."
"In various stages through history, most recently in the 1990s through to the 2000s, and through to the pre-COVID period, duration fulfilled that role," he says. "You had this asset that you could hold in your portfolio that rallied when equities and other growth assets sold off."
That balance has now flipped, says Tyler, and investors need to question the role duration is playing at the moment.
"We've seen now duration more and more tends to underperform when growth assets sell off. So for us, we're very happy to have not a lot of duration in our portfolios."
Tyler was warning investors of interest rate risk late last year, and says it remains an issue today, despite the lessons from recent history.
"It's somewhat of a historical accident that many investors still rely on the cliche 60/40 portfolio construct, whereby in the fixed income allocation, there's still quite a preponderance of long-duration assets," he says.
"And we saw it back in 2022, that's the most marked performance downturn that we saw from fixed income. It really suffered during that period at a time when equities suffered at the same time."
The answer is to look in other parts of the fixed income market that are offering both resilience and attractive yields.
"That growth asset defensiveness that investors want - if duration is no longer providing that, then fixed income provides a wealth of opportunities outside of long-duration assets and investors need to look more closely at those."
The risks of going it alone
While he's excited about the opportunity, Tyler also cautions against investors looking to seize the moment and build their own fixed income portfolio.
And there are two key reasons for this - the asymmetric risk profile of credit investments compared to equities, and the inability of individual investors to access the full suite of options in fixed income markets.
These factors can mean both lower potential returns and greater risks than you might get with a professional income manager, says Tyler.
"The return's not likely to be as good as what you get in a fund because there are many other levers you can pull in fixed income, and you need a professional manager to do that for you. Secondly, and probably more importantly, it's about realising what the return profile actually looks like."
He makes the comparison to a concentrated equities portfolio of 20 or so stocks, where 10-15 severely underperform but five shoot the lights out. The overall return may still look good despite the majority of the portfolio underperforming.
The same is not true for fixed income. An equal-weighted portfolio of 10 bonds may ostensibly offer a similar level of diversification, but the risk and return profile is completely different, says Tyler.
"Let's say one of those defaults, then you've lost 10% of your capital. What does your upside look like? Your upside is just the coupon that you're earning. So you must manage your downside, you must diversify and that's why a fund is so important."
"Things can go wrong. If you have your own portfolio, that portfolio construction doesn't protect you if things go wrong."
He points to the examples of Virgin Australia and Lehmann Brothers as times when income investors were completely blindsided by defaults. Both had disastrous consequences for many income portfolios.
Credit Suisse is another recent example.
"Everyone knows what happened to Credit Suisse," says Tyler. "Daintree's funds held those bonds up until six or seven months out of that default. And there were enough red flags at that point that we went, 'you know what, we don't need to hold these. We can invest in hundreds and hundreds of other bonds, we don't need to hold these.'"
The unique risk profile highlights the crucial role an active manager can play in income investing, where avoiding risks is as important as finding returns.
"That thinking on your feet - it works both ways. It's about looking for opportunities, but also being quick to cut things out of the portfolio."
So if the stars have aligned for fixed income right now, it doesn't mean things can't still come crashing back to Earth, and that's why investors need to stay smart, says Tyler.
"You're looking for opportunities at all times, but you're also trying to make sure that you're on top of your risks at all times. And in fixed income, as I've mentioned with that asymmetric return profile, that piece is really important."
Managed Fund
Daintree Core Income Trust
Australian Fixed Income
View
ETF
Daintree Core Income Active ETF (DCOR)
Australian Fixed Income
View
Never miss an update
Enjoy this wire? Hit the ‘like’ button to let us know.
Stay up to date with my current content by
following me below and you’ll be notified every time I post a wire
Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance.
He has previously worked at Finder, FourFourTwo and Man Of Many covering everything from film to football.
He has a Masters in Media Production and a Bachelor's in Journalism.
........
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.
2 topics
1 stock mentioned
2 funds mentioned
1 contributor mentioned
Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance. He has previously worked at Finder, FourFourTwo and Man Of Many covering...
Expertise
Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance. He has previously worked at Finder, FourFourTwo and Man Of Many covering...
Expertise
Comments
Comments
Sign In or Join Free to comment
most popular
Equities
AI is changing where value accrues. Most investors haven't noticed
Swell Asset Management
Buy Hold Sell
Buy Hold Sell: 3 market leaders (and 2 big buys)
Livewire Markets
