State Street Floating Rate Fund (SST4725AU) Report & Performance

What is the State Street Floating Rate Fund fund?

State Street Floating Rate Fund aims to outperform the RBA Cash Rate by 1.0% to 1.5% over a rolling three year period before fees. The State Street Floating Rate Fund invests in a diversified portfolio of select Floating Rate Notes, ADI certificates of deposits and overnight cash deposits. Although the constitution of the Fund permits borrowing, we do not intend to undertake any long-term borrowings for the Fund. However, from time to time we may undertake short-term borrowings for operational purposes. The Fund does not permit the use of options, futures or other derivatives.

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For State Street Floating Rate Fund

State Street Floating Rate Fund Fund Commentary June 30, 2023

Adding to this sticky inflation scenario, yield curves have been forced to reverse near-term anticipated recessionary pricing, as persistent economic data reflects a resilient consumer in the face of higher borrowing costs. Credit spreads performed well over the quarter. The Australian money market is flush with liquidity. Banks are increasingly paying up for funding as some of the extraordinary Quantitative Easing measures implemented by the Reserve Bank of Australia (RBA) are rewound. However, the glut of senior unsecured bank issuance that was predicted by some to fund Term Funding Facility maturities has not eventuated.

What has permeated through the Australian money market has been selective issuance by banks outside of the major four, whereby covered notes with a soft bullet maturity have been offered via the primary market. Although issuance of this style hasn’t been substantial during Q2, it has been interesting to see banks using their name, and not the name of a structured note, to print debt that is covered, or backed, by RMBS assets. The term ‘resilient’ has been used by the Federal Reserve several times during Q2 to describe the spending and consumption patterns of the US consumer. From a domestic perspective, consumer spending has been stronger than expected, particularly in the services sector of the Australian economy.

Coupled with an unemployment rate that is still well below 4% mid-way through 2023, and on the back of consistent monetary policy tightening from the RBA since May 2022, suggests that the Australian consumer is equally resilient1 . From a fixed income perspective this resilience is not what economists were predicting coming into 2023, and economic commentators were adamant that the second half of 2023 would be characterised by widespread technical recessions, stagflation and monetary policy easing by many central banks. This scenario has thankfully not eventuated and yield curves were forced to reprice and move higher across the curve. If unemployment continues to remain near historic lows over the medium-term, or even moves up toward 4.5% over the coming 12-18 months, as the RBA correctly points out and indeed forecasts, this will still be markedly stronger than where the domestic employment data was printing pre-COVID. Add to this a RBA that is determined to engineer a soft landing for the economy whilst still tightening interest rates further, it seems logical to anticipate higher yield curves in the short- to medium-term.

Credit spreads on the other hand seem well positioned to strengthen as primary issuance is actively sought by the market. Credit events, similar to Q1 which bore witness to regional banking wobbles in the US and the forced merger of a large European bank, appear to be thankfully behind us. The portfolio outperformed the index over the quarter whilst maintaining an average credit rating of AA-/A+.

READ HISTORICAL PERFORMANCE COMMENTARIES

Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
State Street Floating Rate FundSST4725AUManaged FundsFixed IncomeDiversified CreditFixed Income - Diversified Credit IndexGlobal Aggregate Hdg Index89.40 M0.25%00.03%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
State Street Floating Rate Fund0.52%1.29%5.21%1.86%2.1%0.28%0.92%0.94%0%-1.56%-1.56%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
State Street Floating Rate FundFixed Income - Diversified Credit Index-1.63%-0.38%0.09%0.03%0.03%0.052.39%1.9%0.40.76

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
State Street Floating Rate FundYes-https://www.ssga.com/-

Product Due Diligence

What is State Street Floating Rate Fund

State Street Floating Rate Fund is an Managed Funds investment product that is benchmarked against Global Aggregate Hdg Index and sits inside the Fixed Income - Diversified Credit 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 State Street Floating Rate Fund has Assets Under Management of 89.40 M with a management fee of 0.25%, a performance fee of 0 and a buy/sell spread fee of 0.03%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the State Street Floating Rate Fund has returned 0.52% in the last month. The previous three years have returned 1.86% annualised and 0.94% each year since inception, which is when the State Street Floating Rate Fund 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 State Street Floating Rate Fund first started, the Sharpe ratio is 0.74 with an annualised volatility of 0.94%. The maximum drawdown of the investment product in the last 12 months is 0% and -1.56% 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 State Street Floating Rate Fund has a 12-month excess return when compared to the Fixed Income - Diversified Credit Index of -1.63% and -0.38% 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. State Street Floating Rate Fund has produced Alpha over the Fixed Income - Diversified Credit Index of 0.09% in the last 12 months and 0.03% since inception.

What are similar investment products?

For a full list of investment products in the Fixed Income - Diversified Credit Index category, you can click here for the Peer Investment Report.

What level of diversification will State Street Floating Rate Fund provide?

State Street Floating Rate Fund has a correlation coefficient of 0.76 and a beta of 0.05 when compared to the Fixed Income - Diversified Credit 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 State Street Floating Rate Fund and its peer investments, you can click here for the Peer Investment Report.

How do I compare the State Street Floating Rate Fund with the Global Aggregate Hdg Index?

For a full quantitative report on State Street Floating Rate Fund compared to the Global Aggregate Hdg Index, you can click here.

Can I sort and compare the State Street Floating Rate Fund to do my own analysis?

To sort and compare the State Street Floating Rate Fund financial metrics, please refer to the table above.

Has the State Street Floating Rate Fund 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 State Street Floating Rate Fund?

If you or your self managed super fund would like to invest in the State Street Floating Rate Fund please contact via phone or via email .

How do I get in contact with the State Street Floating Rate Fund?

If you would like to get in contact with the State Street Floating Rate Fund manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the State Street Floating Rate Fund. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - December 31, 2022

Floating-rate senior-unsecured bank debt performed strongly in the fourth quarter of 2022. As opposed to the first several months of 2022 when yield and spread curves aggressively widened. This pivot occurred as global markets acknowledged that central bank stimulus would continue to be rapidly unwound as the world came out of pandemic lockdowns.

The latter half of 2022 presented opportunities to lock in senior unsecured bank spreads at levels not seen for many years. Fixed income indices globally endured a very tough fourth quarter of 2022, indeed the entire year was tough for bond investors.

The aggressive repricing of fixed yield curves throughout 2022 was driven by strong inflationary repricing throughout the year combined with the rapid withdrawal by many central banks of loose monetary policy and bond buying programmes. Added to this scenario in Australia was the unwinding by the Reserve Bank of Australia (RBA) of the term funding facility (TTF) on 30th June 2021. Although this move occurred well over a year ago, the downstream effects are just starting to be seen as banks look to source funds from the market. The TFF was an opportunity for Australian banks and branches of International banks operating in Australia to borrow up to three year money from the RBA at a de minimis cost of 0.10%.

The RBA, led by Governor Lowe, launched this loan facility in 2020 in an attempt to avoid a Global Financial Crisis (GFC) style market wobble at the height of the COVID pandemic. While the facility was in place banks were, understandably, reluctant debt issuers in the money market – simply because they could borrow from the RBA at near zero for a maximum of three years. The last possible maturity date for the TFF is 30 June 2024. It does seem likely that there will be an uptick of primary issuance in Australia as TFF loans are repaid, and in part funded from the money market both domestically and globally. The RBA wound-back the TFF as mentioned earlier in mid-2021. Senior unsecured Issuance from that point until mid-2022 was very light from most banks that run AUD debt programs as they had understandably borrowed 1-3yr money from the RBA. These loans from the RBA have started to unwind. Banks have started issuing again at very palatable spreads in both the one year, three year and five year space. This has allowed money market participants to not just be marked with their existing positions wider as spreads blew out, but to actually partake in the wider spreads in the primary market as major four banks, and others, printed senior unsecured floating rate notes in the 5 year space at spreads of over 1.00% in excess of 3month BBSW.

After a tough 2022, the outlook for investors seeking income, looks more attractive and there is an opportunity as TFF maturities drive banks to issue floating rate notes in the primary market, to position portfolio’s to have exposure to high quality domestic floating rate notes to complement traditional duration.

Performance Commentary - September 30, 2022

The third quarter of 2022 saw continued market volatility across all asset classes. Against this backdrop, we assess how the floating-rate segment performed and why fixed-rate repricing should persist into the new year.

A Notable Imbalance Between Supply and Demand
However, another factor was in play. Outside of COVID-initiated supply-chain issues and fossil-fuel challenges driven by the Russia-Ukraine conflict, the withdrawal of pandemic-related stimulus has revealed a significant imbalance between supply and demand in most goods that needs to be addressed. And until an equilibrium of sorts is achieved, higher cash rates, tighter monetary policy, and higher yields will be commonplace.

Floating-Rate AUD Bank Spreads Remain Steady
In market terms, floating-rate senior-unsecured Australian-dollar (AUD) bank spreads managed to hold their ground over the quarter. Even as fixed Australian government bond yields sold off sharply across the curve, credit spreads in senior-unsecured bank notes with bullet maturities traded in a predominantly liquid market. Indeed, it was sometimes hard to source investmentgrade AUD-issued bank paper. That’s not to say there wasn’t intra-month volatility, and on several occasions, we saw equity markets post eye-watering losses.

Forced Selling and Gilt-Market Pressure
On days with blanket selling across most asset classes, credit spreads were dragged wider in sympathy with the risk-off style positioning. Added to this were periods in the latter stages of the quarter when offshore-domiciled liability-driven investment (LDI) funds were forced sellers of their sovereign and credit positions to fund margin calls. This came as the Gilt curve was under enormous selling pressure on elevated inflationary concerns. In this environment domestic investment-grade seniorunsecured credit again mirrored offshore credit in late September by moving wider.

Fixed-Rate Repricing and Weaker
Yields So, as we enter the final quarter of 2022, it appears that in the wake of the sell-off to wides not seen for years, domestic seniorunsecured bank spreads have found an equilibrium of sorts and further substantial widening will face resistance.

Performance Commentary - June 30, 2022

For the majority of debt instruments, the first quarter of 2022 was a very tough start to the calendar year as widening credit spreads hit the asset class hard. Senior unsecured floating rate notes did not bear the brunt of the weakness, purely because of their short interest rate duration, but were not immune to weaker global credit markets.

In attempting to dissect the quarter into palatable bite size snippets of what drove the market, it’s worth discussing the three main drivers – building inflationary pressures, the Ukraine invasion and bank issuance. Inflationary pressures both domestically and offshore repriced the yield curve of most developed markets during Q1. It is becoming increasingly apparent with offshore central banks tightening monetary policy and the much anticipated ‘soon to tighten’ Reserve Bank of Australia, that after two years plus of very stimulatory monetary policy, both via traditional and non-traditional methods, the global economy has made it out of the COVID pandemic.

As global central banks withdraw stimulus, coupled with ongoing supply chain issues, we believe that interest rates are going to move higher. In some countries much higher. Globally, there were many investment grade bond indices that recorded their worst first quarter of performance since the 1980’s. It was a brutal move higher in yields, and spread products via fixed credit markets, were dragged along for the bumpy ride. Secondly, was the Russian invasion of Ukraine. For a brief period in late February, the rates market had a risk-off tone as bonds were bid aggressively. This was however short lived. The realisation came very quickly that Russia is a huge supplier of both oil and gas to the global economy. As sanctions were implemented, countries (especially in Europe) procured replacement markets for Russian goods and services, and were willing to pay higher prices that added to already surging global inflationary pressures. Again, bonds were sold aggressively with some fixed income markets seeing eye watering losses particularly in the long end of the curve as yields blasted off from historic lows driven by the pandemic. Credit and spreads were again dragged along for the repricing however short-duration exposures fared much better than, for example, 10-, 20- or 30-year fixed-rate bonds.

Performance Commentary - December 31, 2020

The final three months of 2020 in the Australian money market were characterised by the Reserve Bank of Australia (RBA) taking monetary policy into un-chartered waters. As we have discussed in previous insights, central banks globally were adamant that this COVID-19 induced market volatility was not going to become another financial crisis of sorts, and at a minimum, liquidity in financial markets would be buoyed to ensure secondary markets functioned properly and yields would be kept low for borrowers of all calibers.

To that end, the RBA in Q4 2020 reduced the official cash rate target to 0.10% and continued the yield curve control measures whereby Governor Lowe has targeted the 3yr Government Bond Yield, and pegged it to the cash rate target, thereby signaling to the market that monetary policy will be maintained at this stimulatory setting for the next three years. Add to this the announcement by the RBA in November that a Quantitative Easing (QE) program via secondary market purchases was to be added to the already bond friendly yield curve control measures and it was broadly acknowledged that the Australian money market was, if not already, very soon to be awash with cash.

The RBA had also extended its Term Funding Facility (TFF) to authorised deposit-taking institutions (ADI’s) into 2021 which meant that banks did not have to issue notes via the primary market but could instead procure up to three years of funding from the RBA at 0.10%. This combination of multiple RBA monetary policy and liquidity measures, coupled with a TFF ensuring limited primary market senior unsecured issuance in the second half of 2020, compressed credit spreads for the last 6 months of 2020 as market participants sought to invest in existing credit issuance in the secondary market. The market dynamic outlined above for 2020 has the potential to change in 2021. Central banks will taper their additional liquidity measures as both the COVID-19 vaccine(s) are distributed and economies get back to the new normal. As global markets, and in particular rates and credit markets, have seen in previous periods where central banks reduce stimulatory measures, there is the likelihood of ‘taper tantrums’ where markets object, albeit briefly, about the reduced access to cheap money.

If there is a tapering of stimulatory measures, this will be a confirmation of the fact that both employment, growth and potentially inflation are back on track and Governor Lowe deems such extraordinary additional market liquidity measures are no longer warranted. If this scenario were to play out and tapering were to begin at some point in 2021, bonds would lose their secondary market QE driven bid from the RBA, inflation would again start to hit economists radars, the TFF would be retired and banks would start issuing senior unsecured debt again into a market that isn’t awash with surplus funds, and investors will be able to buy in the primary space higher yielding, highly liquid senior unsecured bank names. Acknowledging that is a lot of ‘ifs’, even if only a portion of this scenario plays out this year, it still bodes well for floating rate senior unsecured bank debt in 2021. The State Street Floating Rate Fund outperformed the RBA Cash Rate again in Q4. The portfolio as at 31 December was running a spread duration of 2.84 years, had an average credit quality of A+/A and had an average coupon of 0.93%.

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