The new Managed Income Portfolio Service offers four options: Core Income, Income Plus, Inflation-Linked and a Customised approach for investors with over $5 million to invest. Over the next four weeks, we’ll profile each of the options
The Core Income Investment Program
This program aims to provide a low risk portfolio that is primarily focused on investment grade securities, investing in the most senior parts of the capital structure.
Like the fundamentals of the fixed income asset class, this portfolio, or program option, aims to provide investors with strong levels of capital preservation and regular income flow.
All of the Managed Income Portfolio Service (MIPS) programs are bound by a set of rules that the portfolio manager must obey, giving you confidence that your portfolio will meet your objectives. For example the Core Income option can only invest in senior debt, must have at least five bonds and can only invest a maximum of 15% in sub-investment grade and unrated bonds.
Core Income Investment Program Parameters
The figure above displays the parameters included minimum number of bonds, maximum modified duration, approved currencies and more detail for the Core Income Investment Program offered through MIPS.
Source: FIIG Securities
We’ll source most of the bonds from those included in one of the market’s indices: Bloomberg AusBond Composite 0+ yr, Bloomberg AusBond Credit 0+ yr and Bloomberg AusBond Credit FRN 0+ yr indices. These Bloomberg indices together are the most representative and exhaustive ‘universe’ of Australian traded bonds/securities. The underlying securities that make up these indices are considered the starting point when identifying and constructing strong risk/return bond portfolios in the investment grade space.
We will also be looking for opportunities in the new issue pipeline while considering the refinancing of maturing bonds.
The Portfolio Management (PM) team will consider all of the companies and entities that issue bonds from the ‘universe’ above. In order to identify attractive targets, we will then apply a number of key credit and financial metrics to compare returns and then, analyse the strength of the credit rating to other available investments with similar ratings and/or from companies in the same sector.
Our analysis will include:
- Profitability measures Revenues and EBITDA
- Gearing- Debt to Equity ratio
- Leverage- Net Debt to EBITDA
- Asset Strength- Debt to Net Tangible Assets
- Liquidity- Interest Cover Ratio
- Debt to Enterprise value measure
The PM team will then apply volatility measures, focussing on changes in probability of default (that is the likelihood of non-payment of interest or principal), to identify issuers within this subset that warrant further investigation.
Finally, the PM team will select a target investment portfolio of securities, taking into account other portfolio factors such as our in-house views on interest rates and portfolio: duration, distribution and diversification.
The process we will use will generate target bonds which the PM team will refer to when constructing and managing client portfolios.
For more information please see the Managed Income Portfolio webpage
, where you can also now view our new video on the service.
If you have any queries please contact your FIIG Representative or call our offices. Please also note that the Managed Income Portfolio Service is available to wholesale investors only with a minimum investment of $250,000.
Disclaimer: The contents of this document are copyright. Other than under the Copyright Act 1968 (Cth), no part of it may be reproduced or distributed to a third party without FIIG’s prior written permission other than to the recipient’s accountants, tax advisors and lawyers for the purpose of the recipient obtaining advice prior to making any investment decision. FIIG asserts all of its intellectual property rights in relation to this document and reserves its rights to prosecute for breaches of those rights.
Certain statements contained in the information may be statements of future expectations and other forward-looking statements. These statements involve subjective judgement and analysis and may be based on third party sources and are subject to significant known and unknown uncertainties, risks and contingencies outside the control of the company which may cause actual results to vary materially from those expressed or implied by these forward looking statements. Forward-looking statements contained in the information regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this report. Opinions expressed are present opinions only and are subject to change without further notice.
No representation or warranty is given as to the accuracy or completeness of the information contained herein. There is no obligation to update, modify or amend the information or to otherwise notify the recipient if information, opinion, projection, forward-looking statement, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
FIIG Securities Limited ABN 68 085 661 632, AFS Licence No. 224659 (‘FIIG’) shall not have any liability, contingent or otherwise, to any user of the information or to third parties, or any responsibility whatsoever, for the correctness, quality, accuracy, timeliness, pricing, reliability, performance or completeness of the information. In no event will FIIG be liable for any special, indirect, incidental or consequential damages which may be incurred or experienced on account of the user using information even if it has been advised of the possibility of such damages.
FIIG provides general financial product advice only and does not take into consideration your objectives, financial situation and needs. A corporate bond is not a bank deposit. Corporate bonds have a greater risk of loss of some or all of an investor’s capital compared to bank deposits. The Managed Income Portfolio Service (MIPS) is available to qualified Wholesale investors only and is subject to the terms and conditions set out in the MIPS Information Memorandum. For a copy of FIIG’s general MIPS disclaimer please go to www.fiig.com.au/MIPSdisclaimer. For a copy of FIIG’s Financial Services Guide please go to www.fiig.com.au/FSG.
The FIIG research analyst certifies that any views expressed in this document accurately reflect their views about the companies and financial products referred to in this document and that their remuneration is not directly or indirectly related to the views of the research analyst. This document is not available for distribution outside Australia and New Zealand and may not be passed on to any third party without the prior written consent of FIIG. FIIG, its directors and employees and related parties may have an interest in the company and any securities issued by the company and earn fees or revenue in relation to dealing in those securities.