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Wednesday 13 March 2024 by Malcolm Pink Company updates

FIIG Australian Bond Fund now open to all investors

The FIIG Australian Bond Fund (Fund), previously only available to wholesale investors, has opened its doors to retail investors seeking diversification and income opportunities in the Australian fixed income market. The Fund now offers a more accessible minimum investment of $10,000 (previously $25,000), allowing a wider range of investors to participate.

Launched in October 2023, the Fund has consistently delivered a strong performance, exceeding its benchmark, the Bloomberg AusBond Composite 0+Yr Index, since its inception. This outperformance highlights the expertise of the Fund's experienced management team, led by Kieran Quaine, the Head of Investment and Portfolio Management.

Kieran has tallied over 30 years of experience in fixed income markets, bringing a wealth of knowledge to the Fund's management. He is supported by Megan Romeo, a Portfolio Manager with over 15 years of expertise in fixed income, known for her strong analytical skills and deep understanding of the market. Together, they leverage their combined experience to navigate the complexities of the fixed income landscape and make informed investment decisions for the Fund.

The Fund prioritises two key objectives: safeguarding investor capital and achieving returns that surpass the benchmark over three-year rolling periods. The Fund achieves this by actively managing a portfolio of investment-grade Australian fixed interest securities, including government and corporate bonds, mortgage-backed securities, asset-backed securities, and cash instruments.

For comprehensive information on the Fund, including performance, Fund composition, and fees, please visit the FIIG Australian Bond Fund website.


Taking a Closer Look: Two Bonds Shaping the FIIG Australian Bond Fund

Dive deeper into the FIIG Australian Bond Fund as we explore two specific bonds within its portfolio. We'll examine their issuers, key features, and how they contribute to the Fund's overall strategy.

Bond 1

Issuer: Commonwealth Government of Australia

Capital Structure: Senior

Maturity Date: 21-May-2041

Coupon: 2.75%, paid Semi-Annually

Issue size: $14.3bn

Yield to Maturity (YTM): 4.30%

Investment Grade Rating: AAA

Percentage of total fund exposure: 2.28%

This issue is the longest maturity asset held in the fund and is a constituent of the Bloomberg AusBond Composite 0+Yr Index. This asset forms a core component of the current ‘longer than index duration’ investment strategy, consistent with our view that interest rates would commence falling as evidence of inflation falling continued. Whilst the YTM is low, this asset has been the best performer in the fund given it has generated large capital gains following a rally from a YTM of above 5.00% to its current yield of 4.30%.

Bond 2

Issuer: Macquarie Bank Ltd

Capital Structure: Subordinated, Unsecured

First Call Maturity Date: 1-March-2029

Final Maturity Date: 1-March-2034

Coupon: 5.953%, paid Semi-Annually

Issue size: $600m

Yield to First Call Maturity: 5.77%

Investment Grade Rating: A-

Percentage of total fund exposure: 1.40%

This issue is one of the higher-yielding assets held within our fund. It was purchased as a new issue in the primary market in late February 2024. Notably, it is not included in the Bloomberg AusBond Composite 0+Yr Index. However, its strategic importance lies in its role as a core component of our diversified exposure to bank debt, contributing both to yield and to the duration strategy. Since its issuance, Moody’s Rating Services has upgraded Macquarie Bank. We anticipate further capital gain for this asset as a function of the secondary market pricing it tighter in yield relative to the government yield curve.