Download Report

Antares Income Fund
Monthly Investment Report
May 2015
Fund Performance
Period Ended
31 May 2015
Net return vs Benchmark return (%)
SI pa
3%
1 Mth %
3 mths %
1 Year %
Antares Income Fund
0.21
0.71
3.12
3.48
Bloomberg AusBond Bank
Bill Index
0.20
0.59
2.65
2.96
Difference
0.01
0.12
0.47
0.52
3.50
3.00
1,2
2.50
2.00
1.50
1.00
0.50
1
Past performance is not a reliable indicator of future performance. Returns are not guaranteed and actual returns may
vary from any target returns described in this document.
²Investment returns are based on exit prices, and are net of management fees and assume reinvestment of all distributions.
³ Performance inception 4 November 2013.
Investment return objective
The Antares Income Fund aims to provide investors with a regular income and a
return (after fees) that exceeds the Bloomberg AusBond Bank Bill Index over
rolling three year periods.
Highlights for the month
Performance
The Fund returned 0.21% (net of fees) for the month of May outperforming its
benchmark by 0.01%.1
Contributors to performance (relative to the benchmark)
The principal contributors to the Fund’s performance during April were Running
yield and roll-down (yield compression as the maturity profile of the Fund’s
existing credit holdings shorten as time passes) which contributed positively to
returns.
0.00
1m %
Qtr %
Antares Income Fund
Key characteristics
Fund
Benchmark
Duration (yrs)
0.12
0.13
Running yield + Rolldown (%)
3.25
2.07
Credit spread duration (yrs)
2.05
-
A+
AA-
27%
100%
$180.9
-
Average credit rating
Liquidity*
Fund Size (millions)
* Liquidity deemed available within 24 hours.
Distribution History
Distribution date
Distribution amount
Australia: Bond markets experienced a volatile month mirroring the moves of
the US Treasuries and German Bunds. The German bond markets experienced a
ferocious 35 bp sell off during the first part of the month. All these markets
reversed most of the losses in the 2nd half. The volatility in global bond markets
has continued through the early part of June with yields continuing to rise.
Credit spreads continued to drift sideways; Aus iTraxx ended 1.4bps wider at
90bps. This narrow trading range is a continuation of the conditions experienced
over the last two months.
The RBA cut rates by 25bps at its May meeting but did not provide any explicit
forward guidance, which saw the market assuming the tightening cycle was
over. Notably this had an impact on the AUD with it rising not long after the
announcement of a cut and ending the month essentially unchanged from the
announcement. Economic data in Australia showed a mixed picture with
Employment largely flat. Credit growth was positive with investment lending
driving this increase. Q1 GDP was also a positive growing above expectations –
however detailed examination of the components of GDP showed some negative
trends in incomes. Also showing a negative trend was CAPEX data which showed
declines in all categories.
Global: Global bond markets have remained volatile in May as investors
unwound concentrated positions put on in anticipation of European QE. Greece
30 June 2015
Rating Exposure (by market value)
AAA
6.77
AA+
0.01
AA
16.28
AA-
33.51
A+
13.63
A
6.04
A-
14.77
BBB+
8.99
Fund Positioning
3.00
Defensive to Opportunistic
Opportunistic
Market Review
0.49 Cents Per Unit
2.50
2.00
Neutral
The Fund increased credit duration to approximately 2.05 during May. The Fund
continued to target credit exposure at the front part of the credit curve to
maintain carry and roll down without taking on excessive spread duration. In the
primary market we participated in ANZ Senior (2020) ‘Green Bond’ as well as
purchasing a variety of shorter dated corporate and financial bonds in the
secondary market.
Next distribution date
31 March 2015
1.50
1.00
Defensive
Fund Activity
SI*%
Benchmark
0.50
Spread Duration
0.00
was a constant headline during May as the potential for a new bailout deal rose and fell.
The US economy showed more signs of stabilization in Q2 with labour market data indicating declining unemployment. The market
continues to speculate on the timing of the US Fed raising rates. Euro-zone manufacturers’ intentions remain positive with Italy and
Spain contributing with stronger export performance. The Chinese economy remains steady with growth of around 7% still being
predicted by the government agencies.
Market outlook
US: The US expansion has regained some momentum in Q2 after the Q1 slowdown. Housing has been a strong feature with home prices,
home starts and existing home sales all strengthening. The auto industry has been a firm spot and forward manufacturing indicators such
as the ISM have been improving through May. The IMF has cut their 2015 GDP forecast for the US to 2.5% from 3.1%. Recent speeches by
FED governors imply no urgency for the FED to start raising rates, and when they start for the path to be very gradual. Nonetheless,
markets have reacted to the possible start of rate normalization by reducing “overcrowded” long bond positions. Currently the market is
looking for the Fed to begin tightening November/December this year with a 2nd tightening in Q2 2016.
EUR: The stronger Euro accompanying the rout in Bunds could take the edge off the recent growth trend. The Greece fiasco lingers on
with staggered IMF payments now to be combined into 1 single payment of EURO 1.54bn on 30 June. This date now looms as a point of
resolve; the can has been kicked as far as it can go…..or has it? June will no doubt maintain the volatility of May
China: China’s Central Bank has so far succeeded in cushioning the adverse effects and shocks of the restructuring of the economy.
Property speculation has flowed into stock market speculation at a staggering rate. The Shanghai Index is up 50% in the last 3 months to
5000, driven by massive leverage. The 2007 peak of 5900 looms as a key level for investors.
AUS: The slow transition of growth from the weakening resource sector remains a major concern of the RBA. The recent slowing capex
numbers show how painful this transition is. The fall in the April trade deficit to 3.9bn from 1.3bn is an added shock and has helped
weaken the AUD to 0.77. Markets are pricing in a 60% chance of a rate cut in December.
Strategy
The Antares’ scenario analysis is still weighted towards slower global growth, producing slower rate rises from the FED and further
easings in AUS to help propel the AUD lower. During May there has been a material volatility in global bond yields and this has continued
into June. We believe the swings in bonds are primarily position/flow driven. Massively crowded long bond positions and curve flatteners
were accumulated after the ECB’s QE announcement. We think the selloff is primarily an unwind of the last 75bp rally but not a
fundamental shift i.e. there is no inflation scare and no looming growth surge.
For credit we see Fair Value on the iTraxx as over 100, making the current 90 level acceptable, given the attractive 13bp rolldown over 6
months. Credit will be retained at current overweight levels, particularly via the banks. At iTraxx levels around 95 we will look to add
credit exposure.
We expect the disinflationary trends to keep supporting longer bonds, driving a yield curve flattening.
Our key concerns remain:
1) Stronger US growth that brings forward expectations of the timing and particularly the size of Fed tightening of US monetary policy.
2) Slower Chinese growth and/or a stock market collapse that threatens to expose imbalances in their housing and banking sector, and
substantially affect Australia via our bulk exports and confidence in our housing market.
3) Turbulence in Europe from various corners; particularly Greece forcing a departure from Euro;
Asset allocation – 31 May 2015
Term Bucket Breakdown (Market Value %)
Sector Breakdown (Market Value %)
Covered Bonds Other
‐2%
0%
4+ yrs
25%
0‐6 mths
45%
3‐4 yrs
3%
30‐36 mths
5%
24‐30 mths
4%
18‐24 mths 12‐18 mths
5%
4%
6‐12 mths
9%
Money Market
40%
RMBS
8%
Corporate Fixed
14%
Corporate FRN
36%
About Antares Fixed Income
Antares Fixed Income (Antares) is a specialist fixed interest manager covering a range of domestic and international
securities. Antares has managed fixed interest and cash portfolios for investors since 1990 and currently has over
A$24 billion* in funds under management across a range of cash management, fixed income and liability driven
investment strategies. Antares is focused on delivering performance objectives for our clients within a carefully managed
Contacts
Client Services
Level 21, NAB House
Sydney NSW 2000
Email: [email protected]
Phone: 1300 738 355
Important information
Antares Capital Partners Ltd ABN 85 066 081 114, AFSL 234483 (‘ACP’), is the Responsible Entity of, and the issuer of units in, the Antares Income Fund (‘the Fund’).
NabInvest Capital Partners Pty Limited (‘NCP’) (ABN 44 106 427 472, AFSL 308953) is the investment manager of the Fund. An investor should consider the current
Product Disclosure Statement and Product Guide for the Fund (‘PDS’) in deciding whether to acquire, or continue to hold, units in the Fund and consider whether units in
the Fund is an appropriate investment for the investor and the risks of any investment. This report has been prepared in good faith, where applicable, using information
from sources believed to be reliable and accurate as at the time of preparation. However, no representation or warranty (express or implied) is given as to its accuracy,
reliability or completeness (which may change without notice). This report does not take account of an investor's particular objectives, financial situation or needs. Investors
should therefore, before acting on information in this report, consider its appropriateness, having regard to the investor's particular own objectives, financial situation or
needs. We recommend investors obtain financial advice specific to their situation.
Past performance is not a reliable indicator of future performance. Returns are not guaranteed and actual returns may vary from any target returns described in this
document. Any projection or other forward looking statement (‘Projection’) in this report is provided for information purposes only. No representation is made as to the
accuracy or reasonableness of any such Projection or that it will be met. Actual events may vary materially. Any opinions expressed by ACP constitute ACP's judgement at
the time of writing and may change without notice. An investment in the Fund is not a deposit with or liability of National Australia Bank Limited (‘NAB’) or any other member
of the NAB group of companies (‘NAB Group’) and is subject to investment risk, including possible delays in repayment and loss of income and capital invested. Neither
ACP nor any other member of the NAB Group guarantees the repayment of your capital, payment of income or the performance of your investment. NAB does not provide
a guarantee or assurance in respect of the obligations of ACP or NCP. Bloomberg Finance L.P. and its affiliates (collectively, “Bloomberg”) do not approve or endorse, any
information included herein and disclaim all liability for any loss or damage of any kind arising out of the use of all or any part of this material.