MLC Wholesale Diversified Debt A seeks to be a complete portfolio for the debt securities asset class, and aims to deliver growth by using investment managers who invest and diversify across many companies and securities within that asset class.
The fund delivered a negative return of -0.9% for the quarter and 2.0% in the year to 30 September 2023 (before fees and tax). The fund outperformed the benchmark return by 0.3% for the quarter and 0.9% over the past year.
Global government bond yields have risen sharply in the past three months in response to inflation concerns. Bond investors appear to have become more cautious given rising oil prices and guidance from various central banks that they were prepared to further raise interest rates and hold them there. This view of “higher for longer” interest rates has also impacted global share markets. By contrast, corporate bonds have been more resilient. The current levels of corporate yields have proven more appealing to investors.
During the September quarter we made some changes to our fixed income strategy, impacting the building blocks used for securitised debt and Australian short duration credit strategies. We believe the changes will provide better risk-adjusted return outcomes and will generate better and more consistent returns for our diversified fund investors in an environment of higher, more normalised, bond yields.
What is MLC Wholesale Diversified Debt A MLC Wholesale Diversified Debt A is an Managed Funds investment product that is benchmarked against Global Aggregate Hdg Index and sits inside the Fixed Income - Bonds - Global / 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 MLC Wholesale Diversified Debt A has Assets Under Management of 100.70 M with a management fee of 0.6%, a performance fee of 0.00% and a buy/sell spread fee of 0.41%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the MLC Wholesale Diversified Debt A has returned 2.88% in the last month. The previous three years have returned -2.66% annualised and 3.58% each year since inception, which is when the MLC Wholesale Diversified Debt A 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 MLC Wholesale Diversified Debt A first started, the Sharpe ratio is 0.28 with an annualised volatility of 3.58%. The maximum drawdown of the investment product in the last 12 months is -3.56% and -13.2% 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 MLC Wholesale Diversified Debt A has a 12-month excess return when compared to the Fixed Income - Bonds - Global / Australia Index of -0.1% and -0.49% 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. MLC Wholesale Diversified Debt A has produced Alpha over the Fixed Income - Bonds - Global / Australia Index of 0% in the last 12 months and -0.04% since inception.
What are similar investment products? For a full list of investment products in the Fixed Income - Bonds - Global / Australia Index category, you can click here for the Peer Investment Report.
What level of diversification will MLC Wholesale Diversified Debt A provide? MLC Wholesale Diversified Debt A has a correlation coefficient of 0.94 and a beta of 0.94 when compared to the Fixed Income - Bonds - Global / 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 MLC Wholesale Diversified Debt A and its peer investments, you can click here for the Peer Investment Report.
How do I compare the MLC Wholesale Diversified Debt A with the Global Aggregate Hdg Index? For a full quantitative report on MLC Wholesale Diversified Debt A compared to the Global Aggregate Hdg Index, you can click here.
Can I sort and compare the MLC Wholesale Diversified Debt A to do my own analysis? To sort and compare the MLC Wholesale Diversified Debt A financial metrics, please refer to the table above.
Has the MLC Wholesale Diversified Debt A 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.
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Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the MLC Wholesale Diversified Debt A. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - June 30, 2023 The fund delivered a negative return of -1.1% for the quarter and 0.7% in the year to 30 June 2023 (before fees and tax). The fund outperformed the benchmark return by 0.5% for the quarter and 0.6% over the past year.
Global government bond yields have risen in the past three months. Better global economic activity and tough talk from central banks on the need to reduce inflation have driven higher bond yields. Investors also preferred global shares over bonds given the mania for ‘Artificial Intelligence’ (AI) technology stocks and a stabilisation in the US banking system after March’s ‘Silicon Valley’ crisis.
Corporate bonds have also benefitted from improving risk appetite with narrower credit spreads. Investors are finding the current corporate yields as now providing attractive income potential compared to recent years.
During the June quarter MLC appointed new managers to the fixed income’s extended credit strategy. We believe the addition of Bentham Asset Management and Stone Harbor Investment Partners will provide better risk-adjusted return outcomes for the fund’s extended credit strategy. These new investment manager strategies have diversity of investment approach, insight, and demonstrated ability at outperforming their market benchmarks.
Performance Commentary - December 31, 2022 The fund returned 0.8% for the quarter and -10.4% in the year to 31 December 2022 (before fees and tax). The fund outperformed the benchmark return by +0.2% for the quarter and by +0.5% over the past year.
Global government bond yields managed to stabilize in the final quarter of a very volatile year. There were some encouraging signs that global inflation pressures may have peaked with commodity prices softening and supply disruptions starting to abate. Global economic activity is also slowing, thereby suggesting fading upward pressure on government bond yields.
Corporate bonds also proved more resilient in the final quarter. Notably this stability in credit spreads comes after the sharp widening in spreads for most of 2022 given concerns over the impact of higher interest rates on future corporate profits.
Please refer to the ‘Market commentary’ for an overview of what happened in other domestic and global markets over the quarter.
Performance Commentary - September 30, 2022 The fund returned -2.2% for the quarter and -11.7% in the year to 30 September 2022 (before fees and tax). The fund performed in line with the benchmark return for the quarter and outperformed by 0.3% over the past year.
Global government bond yields continue to rise sharply given inflation concerns. High commodity prices, persistent supply disruptions and increasing wage pressures have been the key drivers for rising bond yields. The Russian-Ukraine conflict since February 2022 has only intensified these inflation concerns.
Corporate bonds have also proven sensitive to expectations for higher interest rates in coming years, as well as the potential for slower economic activity and reduced corporate profitability. Credit spreads have accordingly widened significantly in response to these negative expectations.
Please refer to the ‘Market commentary’ for an overview of what happened in other domestic and global markets over the quarter.
Performance Commentary - June 30, 2022 Performance drivers and positioning of the fund for the recent calendar quarter are explained below. Our investment experts also provide regular investment updates at mlcam.com.au/insights
The fund returned -4.5% for the quarter and -9.5% in the year to 30 June 2022 (before fees and tax). The fund underperformed the benchmark return for the quarter by 0.3% but outperformed by 0.4% over the year.
Global government bond yields have risen sharply over the past three months. Inflation concerns given higher commodity prices and persistent supply disruptions have been the key driver for rising bond yields. The Russian-Ukraine conflict since February 2022 has only intensified these global inflation concerns.
Corporate bonds have also proven sensitive to expectations for higher interest rates in coming years with the potential to slow global growth and reduce corporate profitability.
During the June quarter MLC appointed new bond managers to improve returns and manage risks. These new managers have more flexibility to take market opportunities. Ardea Investment Management and Janus Henderson Investors have been appointed as Australian bond managers in the all maturities strategy, and we’ve removed UBS Asset Management. Brandywine Global Investment Management and PGIM Fixed Income have been appointed as global bond managers in the all maturities strategy, and we’ve removed Amundi Asset Management, Insight Investment Management, Loomis Sayles and Wellington Management.
Performance Commentary - March 31, 2022 The fund returned a negative 4.8% for the quarter and a negative 3.8% in the year to 31 March 2022 (before fees and tax). The fund outperformed the benchmark return for the quarter by 0.6% and by 1% over the year.
Global government bond yields have risen sharply over the past three months. Inflation concerns given higher commodity prices and persistent supply disruptions have been the key driver for rising bond yields. The Russian – Ukraine conflict since 24 February 2022 has only intensified these global inflation concerns.
Corporate bonds have also proven sensitive to expectations for higher interest rates in coming years with the potential to slow global growth and impact profit margins.
Please refer to the ‘Market commentary’ for an overview of what happened in other domestic and global markets over the quarter.
Performance Commentary - September 30, 2021 The fund returned 0.3% for the quarter and 0.3% in the year to 30 September 2021 (before fees and tax). The fund outperformed the benchmark by 0.1% for the quarter and by 1.4% over the year. Global government bonds delivered mild returns for the September quarter. Government yields have drifted sideways given the counterbalancing forces of low interest rate settings by central banks against the climate of rising inflation. Corporate bonds have delivered solid positive returns over the past quarter. Strong optimism for better global health outcomes with the vaccine rollouts and economic recovery has seen investors embrace credit risk.
Performance Commentary - December 31, 2020 The fund returned 1.6% for the quarter and 3.8% in the year to 30 September 2020 (before fees and tax). The fund outperformed the benchmark by 0.7% for the quarter and by 0.5% over the year. Global government and corporate bonds have delivered solid returns over the past quarter. Assertive central bank bond buying and hopes for a virus vaccine has seen investors become more comfortable with credit risk.
The revival in global share markets has also contributed to improving risk appetites. With the extraordinarily low levels of government bond yields across the developed world (most notably Germany and Japan which are below 0% for long maturities), we have tilted the fund modestly towards credit assets where yields are higher and the interest rate risk (duration) is lower. Please refer to the Market commentary for an overview of what happened in other domestic and global markets over the quarter.
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