The Fund delivered +0.74% in July, 9.37% over 12 months and 9.31% annualised over three years continuing to deliver over 5% net return above the RBA cash rate.
Capital In, Spreads In
Spreads in the public ABS market have now retraced much of the widening seen through late 2023, reflecting what is, by some measures, at or near record levels of capital inflows into the sector in history. The volume of money seeking deployment has supported strong issuance, but it has also eroded some of the spread premium that should accompany private transactions. In this environment, protecting that premium, rather than diluting it for the sake of volume is key to sustaining the Fund’s risk-adjusted return profile.
For managers willing to extend risk or compromise on structure, there is no shortage of transactions to deploy into. Our focus remains on maintaining the premium available in well-structured private transactions over comparable public issuance, even if that means exercising patience where pricing no longer compensates adequately for risk.
Balancing Selectivity with Deployment
Selectivity has become a common talking point across the sector, but genuine selectivity is not simply about declining transactions, it is about maintaining a consistent risk/return target and only deploying where those criteria are met. While temporary elevated cash holdings can be a natural feature of this asset class – particularly in preparation for large, well-structured transactions – extended periods of high cash may also indicate a lack of deal flow or an unwillingness to participate at prevailing market levels. With a track record approaching a decade, a strong reputation in the market, and deep relationships built across both strategies, we benefit from a consistently broad and diverse pipeline of opportunities each week. This allows us to remain fully engaged in the market, continually assessing opportunities, and deploying into transactions that offer quality counterparties and structural protections commensurate with the Fund’s return target.
In assessing opportunities, we believe it is important for investors to consider not just the return level offered, but the mechanics of how that return is generated and maintained over time. With the RBA cash rate having moved lower in recent months, funds offering a fixed absolute return now face a materially different environment. As benchmark rates fall, sustaining a higher fixed rate of return without a margin to a floating benchmark such as BBSW becomes progressively harder without either extending duration, increasing credit risk, or compromising on structure. Understanding this interaction between market rates, funding costs, and credit risk is central to managing credit portfolios through rate cycles and preserving risk-adjusted returns.
Consistent Outcomes Through a Disciplined Process
The Fund’s track record continues to reflect a disciplined investment process rather than market timing or opportunistic positioning. Over nearly 10 years, we have navigated shifting economic conditions, liquidity shocks, and changes in market structure without departing from our core mandate. That consistency remains our competitive advantage in an increasingly crowded market.
