May
2015
Standard Life Investments
Absolute Return Global Bond
Strategies Trust
May 2015
The Standard Life Investments Absolute Return Global Bond Strategies Trust (the “Trust”) is invested
primarily in the Standard Life Investments Global SICAV Absolute Return Global Bond Strategies Fund (the
“fund”) which aims to provide positive investment returns in the form of income and capital growth in all
market conditions over the medium to long term. The fund is actively managed, with a wide investment remit
to target a level of return over rolling three-year periods equivalent to cash plus three per-cent a year, gross
of fees. It exploits market inefficiencies through active allocation to a diverse range of market positions. The
fund uses a combination of traditional assets (such as bonds, cash and money market instruments) and
investment strategies based on advanced derivative techniques, resulting in a highly diversified portfolio.
The fund can take long and short positions in markets, securities and groups of securities through derivative
contracts.
Absolute Return
Monthly
The value of investments within the fund can fall as well as rise and is not guaranteed – you may get back
less than you pay in. The fund may use derivatives for the purpose of efficient portfolio management and to
meet its investment objective. The value of overseas assets held in the fund may rise and fall as a result of
exchange rate fluctuations.
Fund Manager
Multi-Asset Investment Team
Buy/Sell Spread*
Buy 0.26%/Sell 0.26%
Launch Date
2 June 2014
ARSN Number
125 896 988
Base Currency
AUD
APIR Code
ETL0134AU
Benchmark
Bloomberg AusBond Bank Bill Index
*This is the current buy / sell spread and it is reviewed monthly. If you wish to confirm the buy /sell spread, please contact the Investment
manager on (02) 9947 1500 prior to making an investment or redemption.
This communication is intended for investment professionals only and must not be relied on by anyone else.
Strategy Information as at 31 March 2015*
Stand-alone risk contribution by strategy
grouping
Return contribution by strategy grouping
Stand alone volatility
(%)
Q1 Contribution
(%)
Credit
0.72
Credit
Cross Market
0.65
Cross Market
Curve
0.35
Curve
-0.25
Duration
0.92
Duration
-0.10
FX
0.61
FX
Inflation
0.54
Inflation
-0.06
Volatility
-0.07
Cash
0.00
Total stand-alone volatility:
3.79
Cash
Diversification:
1.97
Residual
-0.27
Overall Volatility:
1.83
Total
1.42
Top 10 risk contributions by strategy
0.87
0.02
1.19
0.08
Top 5 Return Contributors by strategy
Stand alone volatility
(%)
Top Contributors
Q1 Contribution
(%)
Short US Duration
0.95
Long US Dollar vs Euro
0.48
Brazilian government bonds
0.56
Long Indian vs Euro
0.43
UK v Swedish interest rates
0.47
Brazilian government bonds
0.25
US v UK forward-start inflation
0.46
European forward-start Interest rates
0.24
Australian v UK duration
0.43
Long US Dollar vs Canadian Dollar
0.24
Portuguese v European duration
0.43
US butterfly
0.35
High Yield Credit
0.35
Korean government bonds
0.32
Long Indian rupee v Swiss Franc
0.32
Bottom Contributors
Q1 Contribution
(%)
Short US duration
-0.54
US butterfly
-0.25
Portuguese v European duration
-0.14
Long European payer swaptions
-0.07
Long US forward-start inflation
-0.07
*The strategy information is updated on a quarterly basis (31 March, 30 June, 30 September & 31 December).
Strategy Performance
130
130
125
125
120
Figures quoted are calculated on a redemption
basis over periods to 31 May 2015.
The SLI Absolute Return Global Bond Strategies
Trust (ARSN 125 896 988) commenced on 02 June
2014. For information purposes, we show the
historical performance of the underlying master
fund, the SICAV Absolute Return Global Bond
Strategies Fund [in GBP share class converted from
Sterling to Australian Dollar from inception (30
March 2011) to 18 October 2012; then Australian
Dollar Share class from 18 October 2012 to 2 June
2014].
115
110
105
100
Total Return Index
120
115
110
105
Source: State Street Australia Limited / Standard
Life Investments (Trust) and Thomson Datastream
(Benchmark)
SLI Absolute Return Global
Bond Strategies Trust (Gross)
Index @ Inception = 100
May-15
Sep-14
Mar-14
Sep-13
Mar-13
Sep-12
Mar-12
95
Mar-11
95
Sep-11
100
Bloomberg AusBond Bank
Bill Index
Cumulative Performance
Source: State Street Australia Limited / Standard Life Investments (Trust) and Thomson Datastream (Benchmark)
YTD
(%)
1 month 3 months
(%)
(%)
FYTD
(%)
1 Year
(%)
3 Years
(% p.a.)
Since
Launch
(% p.a.)
SLI Absolute Return Global Bond Strategies Trust (Gross)
1.83
0.37
-0.77
2.98
2.65
4.98
5.46
SLI Absolute Return Global Bond Strategies Trust (Net)
1.51
0.31
-0.96
2.28
1.89
4.30
4.79
Bloomberg AusBond Bank Bill Index
1.04
0.19
0.58
2.41
2.65
2.89
3.43
Past performance is not a reliable indicator of future performance. The SLI Absolute Return Global Bond Strategies Trust (ARSN 125 896
988) commenced on 2 June 2014. For information purposes, we show the historical performance of the underlying master fund, the SICAV
Absolute Return Global Bond Strategies Fund [in GBP share class converted from Sterling to Australian Dollar from inception (30 March 2011)
to 18 October 2012; then Australian Dollar Share class from 18 October 2012 to 2 June 2014].
Investment Review and Outlook
Market Review
The most striking feature of bond
markets in May was the sharp spike
in European bond yields. This set
a turbulent scene for the month,
albeit the tempo of selling slowed
in the latter half. The moves were
triggered in part by rising inflation
expectations and also fears that,
with core European sovereign yields
dipping towards -0.2%, the European
Central Bank would ease off on further
bond purchases. As a result, 10-year
German sovereign yields bounced
off their record lows, with Italian and
Spanish yields increasing by similar
magnitudes.
Nervousness across European bond
markets spilled over to other regions,
with yields in the US and UK also
jumping, although less markedly than
across Europe. This shift in yields had
repercussions for other assets, many
of which price off sovereign bonds.
Thus, equity, currency and commodity
markets were also thrown into flux, as
investors reappraised their positions
and reallocated risk budgets.
Reflecting the moves in underlying
sovereign bonds, credit likewise
delivered negative returns and yields
rose. High yield issues generally fared
better than investment grade.
Global economic data were mixed. In
Europe, for instance, Spain and Italy
reported solid first-quarter growth,
while German business confidence
registered a sharp month-onmonth decline. Eurozone consumer
confidence also worsened for the
second consecutive month in May. In
Japan, meanwhile, the economy grew
between January and March for the
second straight quarter, exceeding
market expectations.
Activity
In May, we added a short UK real
yields and inflation strategy. Amid
the recent bond sell-off, UK real yields
have performed significantly better
than other bond yields, rising less
markedly. This is due to the strong
performance of UK inflation breakeven
rates. As a result, the spread between
UK real yields and inflation breakeven rates has become stretched.
This strategy should benefit if, as we
expect, the spread between these two
measures moves to a more normalised
level.
We also closed our French forwardstart inflation strategy. We would
expect this position to perform poorly
in the event that European growth
surprised on the upside and have
therefore removed it to protect the
portfolio.
Performance
Our long Indian rupee versus New
Zealand dollar currency pair made a
positive contribution, owing primarily
to weakness in the New Zealand
dollar, which in May was the weakest
G10 currency. Having started the
month on a downward trend, the
NZ dollar was undermined by the
announcement of new prudent macro
measures and lacklustre data relating
to dairy prices and PMI. Furthermore,
commodity-sensitive currencies
Investment Review and Outlook
generally struggled.
After a month of relative weakness in
April, the US dollar gained renewed
momentum in May, bolstered by firmer
economic data. This was positive
for our long US dollar versus euro
position.
Quantitative easing by the European
Central Bank has driven down
European sovereign yields in recent
months. However, yields in both the
US and Europe moved sharply higher
in May, as investors reassessed
the inflation and growth outlooks
for these regions, amid signs their
respective economies were improving.
This environment negatively impacted
our Japanese versus Europe payer
spread strategy, but benefited our UK
versus Swedish interest rates strategy,
which was among the top performers.
Also positive was our exposure
to Brazilian government bonds.
The market is moving on from the
Petrobras scandal, focusing instead
on the sound fiscal policies being
pursued by the government and the
anchoring of inflation expectations.
hand, the US appears to be nearing
a tighter monetary regime, whereas
economies like Europe and Japan
continue on a looser monetary path.
Geopolitical tensions remain high and
on many metrics asset prices appear
expensive. We seek to exploit the
opportunities that these conditions
present by implementing a diversified
range of strategies using multiple
asset classes.
Outlook
Our central expectation is still for
modest global growth, albeit with
regional variations. A growing
divergence in central bank monetary
policy will remain an important
driver of asset returns. On the one
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Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority.
Calls may be monitored and/or recorded to protect both you and us and help with our training.
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Equity Trustees Limited (EQT), ABN 46 004 031 298 and Australian Financial Services Licence Number. 240975, is the Responsible Entity
of the Fund. Standard Life Investments Limited (SLI) has prepared this material for information purposes only. It does not contain investment
recommendations nor provide investment advice. Neither SLI or EQT nor its related entities, directors or officers guarantees the performance of, or
the repayment of capital or income invested in the SLI Absolute Return Global Bond Strategies Trust. Past performance is not necessarily indicative
of future performance. Professional investment advice can help you determine your tolerance to risk as well as your need to attain a particular
return on your investment. You should not act in reliance on the information contained in this material. We strongly encourage you to obtain detailed
professional advice and to read the relevant Product Disclosure Statement (PDS) in full before making an investment decision. Applications for an
investment can only be made on an application form accompanying a current PDS which can be obtained by contacting SLI.
To find out more about our fund range, visit our website, contact us at [email protected] or alternatively speak to
your usual contact at Standard Life Investments.
http://australia.standardlifeinvestments.com/institutional
Standard Life Investments Limited (ABN 36 142 665 227) is incorporated in Scotland (No. SC123321) and is exempt from the requirement to hold an Australian financial
services licence under paragraph 911A(2)(l) of the Corporations Act 2001 (Cth) (the ‘Act’) in respect of the provision of financial services as defined in Schedule A of the
relief instrument no.10/0264 dated 9 April 2010 issued to Standard Life Investments Limited by the Australian Securities and Investments Commission. These financial
services are provided only to wholesale clients as defined in subsection 761G(7) of the Act. Standard Life Investments Limited is authorised and regulated in the United
Kingdom by the Financial Conduct Authority under the laws of the United Kingdom, which differ from Australian laws.
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