Advance Australian Fixed Interest Multi-blend Wholesale seeks to provide a source of income from Australian fixed interest exposure with a total investment return (before fees and taxes) that outperforms the benchmark over periods of three years or longer.
Global bond markets were marginally lower over August with both the Barclays Capital Global Aggregate Bond Index (Hedged) and FTSE World Government Bond (ex-Australia) Index (Hedged) returning -0.3%. Apart from Germany, where yields dropped (-2bps to 2.44%), ten-year bond yields moved higher across major jurisdictions including the US (16bps to 4.10%), UK (6bps to 4.37%) and Japan (6bps to 0.64%). Twoyear bond yields were similar, decreasing in Germany (-6bps to 3.04%), while increasing in the UK (17bps to 5.16%), US (1bp to 4.98%) and Japan (3bps to 0.03%).
Returns for most Australian bondholders were positive over August. In a bull steepening move, 10-year bond yields decreased slightly (-3bps to 4.02%), alongside five-year bond yields (-6bps to 3.77%) and two-year bond yields (-24bps to 3.81%).
What is Advance Aus Fixed Intr Multi-Blend W Advance Aus Fixed Intr Multi-Blend W is an Managed Funds investment product that is benchmarked against Australian Bond Composite 0-10Y Index and sits inside the Fixed Income - Bonds - Australia Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Advance Aus Fixed Intr Multi-Blend W has Assets Under Management of 180.91 M with a management fee of 0.55%, a performance fee of 0.00% and a buy/sell spread fee of 0.21%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Advance Aus Fixed Intr Multi-Blend W has returned 2.85% in the last month. The previous three years have returned -2.76% annualised and 3.73% each year since inception, which is when the Advance Aus Fixed Intr Multi-Blend W first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Advance Aus Fixed Intr Multi-Blend W first started, the Sharpe ratio is 0.29 with an annualised volatility of 3.73%. The maximum drawdown of the investment product in the last 12 months is -5.11% and -13.72% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Advance Aus Fixed Intr Multi-Blend W has a 12-month excess return when compared to the Fixed Income - Bonds - Australia Index of 0.53% and -0.05% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Advance Aus Fixed Intr Multi-Blend W has produced Alpha over the Fixed Income - Bonds - Australia Index of 0.01% in the last 12 months and -0.01% since inception.
What are similar investment products?
For a full list of investment products in the Fixed Income - Bonds - Australia Index category, you can click here for the Peer Investment Report.
What level of diversification will Advance Aus Fixed Intr Multi-Blend W provide?
Advance Aus Fixed Intr Multi-Blend W has a correlation coefficient of 0.96 and a beta of 1.22 when compared to the Fixed Income - Bonds - Australia Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Advance Aus Fixed Intr Multi-Blend W and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Advance Aus Fixed Intr Multi-Blend W with the Australian Bond Composite 0-10Y Index?
For a full quantitative report on Advance Aus Fixed Intr Multi-Blend W compared to the Australian Bond Composite 0-10Y Index, you can click here.
Can I sort and compare the Advance Aus Fixed Intr Multi-Blend W to do my own analysis?
To sort and compare the Advance Aus Fixed Intr Multi-Blend W financial metrics, please refer to the table above.
Has the Advance Aus Fixed Intr Multi-Blend W been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Advance Aus Fixed Intr Multi-Blend W?
If you or your self managed super fund would like to invest in the Advance Aus Fixed Intr Multi-Blend W please contact 275 Kent Street Sydney, NSW 2000 Australia via phone 61-2-9259-3555 or via email -.
How do I get in contact with the Advance Aus Fixed Intr Multi-Blend W?
If you would like to get in contact with the Advance Aus Fixed Intr Multi-Blend W manager, please call 61-2-9259-3555.
Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Advance Aus Fixed Intr Multi-Blend W. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - July 31, 2023 In July, global equity markets maintained current upward momentum with most regions delivering solid, positive returns. On the other hand, fixed income performance was mixed, although in this “risk on” phase of the cycle, riskier parts of the sector fared better.
A combination of further declines in headline inflation, resilient economic data, particularly from the US, and market expectations that the current interest rate hiking cycle is nearing an end, led to positive investor sentiment throughout the month.
The advanced Q2 2023 US GDP growth figure was reported late month, coming in at 2.4% and surprising market economist estimates of 1.8%. On the flipside, UK and Eurozone growth was close to flat. Benefitting from the base effects of emerging from its extensive 2022 Covid lockdown, China’s GDP growth rate was measured at an annualised 6.3%, though a little below 7.3% expectations. Forwardlooking composite purchasing manager indices (PMI) kept falling across the globe in July, with Japan the only region holding steady. PMIs for the services sector continue to outpace manufacturing though are easing towards 50, an important level that is considered the line between expansion and contraction.
Inflation data continued to decline, somewhat aided by the impact of last year’s energy price surge rolling off. US headline Consumer Price Index (CPI) fell to 3.0% p.a and is at the lowest level since early 2021. Similarly, CPI data across the UK, Eurozone and Australia, continues to show easing inflationary conditions, albeit at higher levels than the US. CPI has flatlined at near zero in China. Japan was the only major country that recorded a marginal increase in its inflation rate during Q2 2023. Central banks continued to err on the side of caution, increasing rates by 25bps in the US and Eurozone and 50bps in the UK, where inflation remains the highest among major developed economies.
Central banks continued to emphasise a data-driven approach to future rate adjustments. In the US, which is furthest ahead in the inflation cycle, markets are now pricing in a greater than 50% chance that the Fed’s policy rate has peaked and interest rate cuts maybe forthcoming in 2024.
Over July, Hedged Developed Markets Overseas Shares delivered a 2.8% return. US indices were broadly in line with international developed markets, however, Emerging Markets (unhedged) outperformed with a positive 4.9% return. Value modestly outperformed growth over the period, although when looking on a yearto-date basis, mega-cap tech stocks still dominate returns and has led to increased market concentration within that segment of global markets. In the US, with roughly half of S&P500 companies having reported their Q2 2023 earnings, FactSet currently projects a 7% quarter over quarter (QoQ) earnings decline, which would be the softest quarterly outcome since the height of Covid’s impact. That said, to date the majority of companies have reported better than expected earnings results.
Hedged Overseas Government Bonds returned -0.4% over the month, as bond yields across most regions increased in July. Yields on both key long bonds in the US (10-year and 30-year) rose by approximately 15bps over the month. Outside the US, Japan’s 10-year yield rose by around 19bps, which is noteworthy following the Bank of Japan’s announcement that it will further increase the upper tolerance range for the 10-year yield (now 1.0% vs 0.5% previously). The UK was the only major economy where the 10-year yield fell, albeit modestly.
Australian Shares returned 2.9%, marginally outperforming their overseas counterparts in July. Financials (4.9%) and Energy (8.4%) were the strongest sectors of the market, while Healthcare (-1.5%), and Materials (1.4%) detracted.
Performance Commentary - June 30, 2023 Global bond markets generated a negative return over June with the Barclays Capital Global Aggregate Bond Index (Hedged) returning -0.2% and the FTSE World Government Bond (ex-Australia) Index (Hedged) returning -0.3%. Most ten-year bond yields moved higher over the month, increasing in the UK (20bps to 4.38%), the US (16bps to 3.81%), and Germany (14bps to 2.41%), while decreasing in Japan (-3bps to 0.40%). Two-year bond yields mostly moved higher over the month, increasing in the UK (93bps to 5.26%), the US (40bps to 4.94%) and Germany (49bps to 3.19%), while decreasing in Japan (-2bps to -0.08%). Returns for most Australian bondholders were negative over June as 10-year bond yields (42bps to 4.03%), five-year bond yields (58bps to 3.95%) and two-year bond yields (64bps to 4.20%) increased.
Performance Commentary - April 30, 2023 Global bond markets generated a positive return over April with the Barclays Capital Global Aggregate Bond Index (Hedged) returning 0.4% and the FTSE World Government Bond (ex-Australia) Index (Hedged) returning 0.2%. Most ten-year bond yields moved slightly higher over the month, increasing in the UK (23bps to 3.72%), Germany (2bps to 2.32%), and Japan (3bps to 0.36%), while decreasing in the US (-5bps to 3.43%). Most two-year bond yields also rose over the month, increasing in the UK (34bps to 3.78%) and Germany (5bps to 2.79%) while decreasing in the US (- 5bps to 4.09%) and remaining unchanged in Japan at -0.05%. Returns for most Australian bondholders were marginally positive over April despite 10-year bond yields increasing (4bps to 3.34%), five-year bond yields (4bps to 3.07%) and two-year bond yields remaining unchanged at 3.08%.
Performance Commentary - March 31, 2023 The Advance Australian Fixed Interest Multi Blend Fund underperformed its benchmark in March with our underlying managers delivering a mixed relative result over the month. Pendal slightly underperformed the benchmark in March.
The domestic duration component of the fund was a positive over the month. The physical portfolio underperformed the benchmark. The government sector positioning added to performance however the non-government portion of the portfolio detracted. Supra-nationals, industrials and real estate sector positioning were the main drivers of the underperformance.
Janus Henderson underperformed the benchmark over the month. Spreads on semi-government bonds tracked wider versus Treasuries, contributing negatively to performance on a relative basis. Credit spreads weakened over the month, which was also a detractor to performance. Macquarie delivered a positive excess in March, driven by sector rotation, security selection as well as duration and curve. It was another volatile month for financial markets in March. Despite central bank hikes the narrative was dominated by risk off moves driven by bank failures in the US and Europe.
In the United States, the Federal Reserve raised the Fed Funds rate by a further 0.25%, taking the upper target band level to 5%. Prior to the decision the market had priced in a 50 basis point move as more likely following comments from Fed Char Powell in the lead up to the meeting. Powell commented that recent economic data had come in stronger than expected and that the level of interest rates is likely to be higher than previously anticipated. Bond yields rallied following the Federal Reserve’s decision to increase the Fed Funds rate due to their dovish commentary and lingering concerns about the state of some of the regional financial institutions.
In their statement the Fed noted that ‘some additional policy firming may be appropriate’, watered down from their previous statement where they saw ‘ongoing increases in the target range will be appropriate’. Powell also commented that the credit contraction from regional banks ‘could easily have a significant macroeconomic effect’. Inflation data was in line with consensus with headline inflation up 0.4% in February resulting in an annual increase of 6%. Core inflation rose 0.5% for the month and 5.5% over the past year.
Performance Commentary - February 28, 2023 The Advance Australian Fixed Interest Multi Blend Fund outperformed its benchmark in February with our underlying managers delivering a positive relative result over the month. Pendal delivered positive excess returns in February. The domestic duration component of the fund was a positive contributor. The physical portfolio outperformed the benchmark. The government sector positioning performed inline whilst the non-government portion of the portfolio performed well.
Financials, supra-nationals, infrastructure, and real estate sector positioning also added to performance. Janus Henderson outperformed the benchmark over the month with value added through active management in both rates and credit. Overweight duration to swap rates over government bonds yields has been a positive contributor. Active allocations to Tier 2 debt was a strong driver of returns as these assets significantly outperformed. Macquarie also delivered a positive excess in February, driven by sector rotation, security selection as well as duration and curve. The Portfolio’s overweight credit positioning contributed positively to performance as Australian credit spreads outperformed global peers. A combination of a hawkish shift by central banks and stronger-than-expected data in the US resulted in higher rates across the curve. This dampened risk sentiment in February. In the United States, the Federal Reserve raised the Fed Funds rate by a further 25 basis points to 4.75%. In their accompanying statement the Committee stated that ongoing increases will be appropriate and that whilst inflation has eased somewhat it remained elevated. In the ensuing press conference Fed Chair Jay Powell noted that financial conditions had tightened ‘very significantly’ in the past year and that they are talking about a couple more rate hikes.
Performance Commentary - January 31, 2023 The Advance Australian Fixed Interest Multi Blend Fund outperformed its benchmark in January with our underlying managers delivering a positive relative result over the month. Pendal delivered a positive excess returns in January. The domestic duration component of the fund was a small positive. The physical portfolio outperformed the benchmark.
The government sector positioning was flat whilst the non-government portion of the portfolio performed well. Industrials, financials, real estate, and supra-nationals sector positioning added to performance. Janus Henderson outperformed the benchmark over the month, with value added through active management in both rates and credit. The fall in bond yields was one of the main drivers of return in the month. The Fund’s exposure to swaps was a positive contributor in January as well. Macquarie also delivered a positive excess in January, primarily driven by both rates and credit strategies. January saw the Australian bond market recover most of the losses from the late December selloff. This was despite a higher-than-expected Q4 2022 inflation number released late in January. The rally was driven by growing signs in the US and other economies that inflation has peaked and central banks will be slowing the pace of hikes or even stopping them completely. In the United States inflation data printed in line with market expectations. Headline inflation fell 0.1% in December, resulting in an annual increase of 6.5%.
Core inflation rose 0.3% for the month and 5.7% over 2022. The fall in headline inflation was driven entirely by the fall in gasoline prices. Key Fed member Lael Brainard acknowledged that inflation data has declined in recent months and that the retail sales and industrial production data showed a slowing in economic growth. Forward looking indicators suggest growth will slow further in 2023 however policy will need to be sufficiently restrictive for some time in bringing inflation down.
Performance Commentary - December 31, 2022 The portfolio outperformed its benchmark in December with our underlying managers delivering a positive relative result over the month. Pendal delivered positive excess returns in December. The portfolio took advantage of the bond market rally in the first half of December to exit a US 5 year long duration position. The physical portfolio outperformed the benchmark. Both the government sector positioning and the non-government portion of the portfolio performed well. Supranationals, financials and industrials sector positioning added to performance. Janus Henderson outperformed the benchmark over the month.
The rise in yields was a detractor for long dated fixed rate bonds over the month. However, active portfolio management including having neutral duration positions throughout most of the month aided performance on a relative basis. Spreads moved slightly wider in semi-government bonds detracting from performance, while swap spreads outperformed government bonds contributing positively. Macquarie also delivered a positive excess in December, primarily driven by security selection as well as sector rotation. It was a busy month in December with central banks continuing to tighten monetary policy although there is clear evidence that inflationary pressures are easing across the developed world. News of the easing of China’s zero covid policy and corresponding China re-opening story was initially viewed positively for markets on the back of improved future global economic growth. However later in the month, concerns grew as it could lead to a spike in global covid cases.
The Bank of Japan broadened the tolerance for its yield curve control target band on the 10yr JGB yield from 25bps to 50bps, and the move surprised the market driving yields higher globally. In the United States, as expected, the Federal Open Market Committee (FOMC) raised the Fed Funds rates by 50bps to 4.25%-4.50%. Fed Chair Jerome Powell had indicated policymakers could moderate the pace of interest rate hikes and the smaller rate hike was widely anticipated.
Strong data out of the US (average hourly earnings, ISM services and producer prices) at the start of the month saw risk markets weaken on the fear of higher inflation. However, in the middle of the month, the market had the US CPI print which was the 2nd consecutive positive (lower) surprise on US inflation, which gave the market a lift. Consumer inflation fell back for the fifth consecutive month, and by more than expected. The Fed lowered its GDP forecast for 2023 and raised its inflation forecast, though the recent fall in inflation has provided investors with hope that the extent and pace of future rate hikes will become more muted.
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