The number and scope of fixed income funds in Australia has grown in recent years, reflecting the growing demand from investors for breadth and depth. Some of these fund use strategies that are new to the domestic Australian market and give investors greater scope to diversify their portfolios. From an investor perspective, since some of these funds are newly launched, their strategies may only have short track records. Some of the funds some of the time can assume significant credit risk. Naturally, past performance is not a guide to future performance. As a result of their brief track records, some may have had no experience of managing their way through a rising interest rate environment and tricky credit environments.
The list below shows some of the new fixed interest strategies introduced within investment trusts, some of them brought to market by leading global bond managers in the last few years. The majority of the unlisted investment trusts are multi-strategy income or diversified credit funds geared to delivering a higher return than traditional fixed interest offerings. Often the investment strategies do not use a benchmark and are free to pick and choose where to invest. Multi-strategy funds include riskier assets like high yield credit and emerging market debt while diversified credit funds may include investment grade corporate bonds and often will have no exposure to interest rates.
Unlisted fund launches in fixed interest in Australia
Advance Defensive Yield Multi-Blend Fund
Invests in a diversified mix of fixed interest, cash and cash equivalent securities and instruments in both Australian and international markets, with an emphasis on liquidity and capital stability regardless of the overall direction of fixed interest and cash markets.
AllianceBernstein Dynamic Global Fixed Income – Australian
Implements a global, multi-sector strategy investing in a broad range of debt securities. The fund may hold corporate bonds, government bonds, ABS, MBA and bank loans located anywhere in the world, including emerging countries. Up to 40 per cent of the fund’s assets may be high risk and rated below investment grade.
AllianceBernstein Global High Income Fund
Invests primarily in corporate debt securities from US and non-US issuers, as well as government bonds from both developing and developed countries, including the US. May invest in debt securities denominated in US dollars or non-US currencies. Under normal market conditions, invests substantially all of the fund’s net assets in lower-rated bonds, but may also invest in investment-grade and unrated debt securities.