- Credit spreads widened on the month, detracting from performance
- Duration positioning was a positive offset to wider credit spreads, but nonetheless the funds return for the month was slightly negative
|Month (%)||Quarter (%)||1 Year (%)||Since Inception* (% p.a.)|
|eInvest Core Income Fund (ECOR)||-0.18||-0.76||0.75||1.42|
|Daintree Core Income Trust||-0.19||-0.77||0.74||2.54|
|RBA Cash Rate||0.01||0.02||0.10||0.25|
^ Inception date for ECOR was 22 November 2019 and inception date for the underlying Daintree Core Income Trust was 1 July 2017. Excess Return since inception is measured on the Daintree Trust. Performance shown above are net of fees. To give a long-term view of the fund performance in the asset class, we have shown the returns of the Daintree Core Income Trust. The Trust has identical investments. Fund returns are calculated using net asset value per unit of the underlying fund at the start and end of the specified period and do not reflect the brokerage or the bid/ask spread that investors incur when buying and selling units on the exchange. Past performance is not a reliable indicator of future performance
ECOR Fund and Investment Objective
ECOR is an absolute return, cash plus, investment-grade bond strategy. ECOR is not constrained by any traditional fixed income index, which provides us the flexibility to seek out the best risk-adjusted returns available across regions, sectors and securities.
The aim of ECOR is to provide a steady stream of income and capital stability over the medium term by investing in a diversified portfolio of fixed income securities and cash. ECOR seeks to produce a return (net of fees) that exceeds the RBA Cash Rate by 1.50-2.00% p.a. within a cycle.
- Modified duration: 0.31 years
- Portfolio Yield: 1.75%
- Average Credit Quality: A
- Portfolio ESG Score: A
- Management Cost: 0.45% (incl. of GST and RITC)
- Inception Date: 22 November 2019
- ECOR paid a distribution of $0.035 dollars per unit in November 2021
ECOR returned -0.18% for the month, leaving the rolling three-year return at 188 basis points above cash, net of fees. The fund’s performance was impacted by wider credit spreads, though this was partially offset by the fund’s modest (0.31 year) duration stance, which added value. Sector performance was mixed: corporate spreads were relatively stable while senior and subordinated financial spreads were wider. Longer tenor spreads underperformed shorter tenor while offshore names also underperformed, particularly higher beta names as the US high yield market saw its weakest monthly performance for the year to date.
We participated in five securitized transactions: Blackwattle RMBS, Pepper RMBS, Latitude ABS, Madison Park CLO and Think Tank RMBS. Financial issuance was relatively modest, and we chose not to participate in any new issues. Within non-financial corporates we participated in new issues from Computershare, Optus (a sustainability-linked bond), Goodman Australia Industrial Fund and Mercury New Zealand.
November saw a continuation of volatility in interest rate markets. Although the relentless rise in bond yields seen in October did not continue, it took the risk-off sentiment surrounding Omicron to push bond yields decisively lower. This same sentiment saw credit spreads pushing wider.
Lower bond yields were not universal; for example, the US 2-year yield continued to see significant upward pressure. Investors remain uncertain as to the severity of US inflation, the likely policy response, the extent of the subsequent slowdown in US demand and the severity of global spillovers. Such uncertainty will linger for some time, and this is driving a significant uptick in the volatility of government bond markets globally. Interestingly, with expectations now heightened that the Fed will taper asset purchases more quickly than expected, US yield curve flattening pressure has also increased. This means investors are increasingly starting to focus not just on the nearer-term trajectory for monetary policy, but also on the level and timing of the end of the current monetary cycle. This part of the cycle is usually where financial asset returns become more volatile, and the faster-than-expected removal of price-insensitive quantitative easing will exacerbate this pressure. We keep a close eye on US real yields as these remain at deeply negative levels but, we feel, susceptible to upward pressure in 2022. If we are correct in this view, higher real yields will reduce the value of the future cash flows across the spectrum of financial assets.
To read more about eInvest Core Income Fund (Managed Fund) Code: ECOR, click here.
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Past performance is not a reliable indicator of future performance. Please read the PDS prior to investing. This information is general in nature and is subject to the terms and conditions outlined here.