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    emax

    EMAX November Monthly Report & Update

    Overview
    • Credit spreads widened on the month, detracting from performance
    • Duration positioning was a positive offset to wider credit spreads, but nonetheless the fund return for the month was negative
    Performance
    Month (%)Quarter (%)1 Year (%)Since Inception* (% p.a.)
    eInvest Income Maximiser Fund (EMAX)-0.59-0.772.930.87
    Daintree High Income Trust-0.61-0.593.162.73
    RBA Cash Rate0.010.020.100.25
    Excess Return-0.60-0.802.830.62

    ^Inception date for EMAX was 22 November 2019 and inception date for the underlying Daintree High Income Trust was 1 November 2018. Excess Return since inception is measured on the Daintree High Income 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 High 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

    Performance

    EMAX Fund and Investment Objective 

    EMAX is an absolute return bond strategy. The Fund 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.

    EMAX aims to provide investors with a monthly income stream over the medium term by investing in a diversified portfolio of credit fixed income securities and cash that exceeds the RBA Cash Rate (after fees) by 3-4% over a market cycle.

    Key Statistics  
    • Modified duration: 0.57 years
    • Portfolio Yield: 3.86%
    • Average Credit Quality: BBB
    • Portfolio ESG Score: AA
    • Management Cost: 0.65% (incl of GST and RITC)
    • Inception Date: 22 November 2019
    • EMAX paid a distribution of $0.092 dollars per unit in November 2021

     

    Fund Review

    EMAX returned -0.59% for the month, leaving the rolling three-year return at 270 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 (0.57 year) duration stance, which added value. Corporate, financial, and structured credit spreads were all wider. Offshore names 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.

    Outlook

    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 Income Maximiser Fund (Managed Fund) Code: EMAX, click here.

    Interested in purchasing units in the fund? Contact your financial adviser or simply purchase via your online broker, and as always read the PDS for more information. This can be found here. 

    Keen to learn more? Read why Active managers tend to outperform passive fixed income managers.

    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.