SMARTER MONEY – COOLABAH CAPITAL INVESTMENTS – SPECIALIST CASH AND FIXED INCOME MANAGER
In our series of fund manager profiles, we speak to Coolabah Capital Investments which manages Smarter Money Investments funds. Smarter Money Investments provides specialist active management in the in the liquid cash plus & short-term fixed interest asset-classes.
The Coolabah/Smarter Money Investments’ portfolio management team is led by experienced fixed-interest, economics research, and managed investment specialists Christopher Joye and Darren Harvey, who are both Executive Directors and Co-Chief Investment Officers.
Christopher previously worked for Goldman Sachs in London and Sydney, the Reserve Bank of Australia, and was the founder of an award‐winning research and investment group, Rismark International. Darren has previously worked for McIntosh Hamson Hoare Govett, Fay Richwhite and Deutsche Bank and Bower Capital.
YR: Christopher, the Smarter Money Fund which has an active cash strategy returned 4.6% gross and 3.6% after fees for the 12 months to 30 June. Term deposits have averaged around 2.8% while the RBA rate averaged 1.5% over this period. What was the mix of income and capital growth in that return?
SM: We are an active manager that focuses on maximising total returns while minimising risk. Applying up to 12 different quantitative valuation models, we try to find bonds that are cheap—or paying too much interest after adjusting for their various risk factors—and which generate capital gains once the bond’s price normalises back to our proprietary estimate of fair value.
In the Smarter Money Fund the average gross running yield on the cash and bonds we have held over the last year was 3.1%. Given the fund’s gross return of about 4.6% we generated an extra 1.5% in capital gains across our cash and bonds on top of our running yield through active asset-selection.
Since our average portfolio weight to cash was 43.6% and bonds only made up 56.4% of our portfolio, the average total capital gains on the bonds, excluding all cash, was about 3% over the year.
YR: What was your best performing asset over the 12 months? What were the return metrics for this?
SM: Our best performing assets are hard to define because we can produce high returns over short holding periods and lower returns over longer holding periods.
At various times over the last 12 months we have extracted significant alpha out of cheap major bank senior bonds, AAA-rated RMBS, AAA-rated covered bonds and some subordinated bonds.