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Credit

Enhanced Australian Fixed Interest

Overview

A differentiated approach

We favour low risk-value add strategies using security selection seeking to deliver consistent, enhanced returns.

True to label enhanced fixed income investing

We match the duration, credit quality, and yield curve of the index with no structural biases or credit enhancement.

Large, experienced, and stable team

We have a deep and experienced global fixed income team with more than 60 investment professionals across three main locations: Australia, the US and the UK.

Philosophy

Our investment philosophy has been built over the years based on our extensive in-house research, and is based on fundamental research, capital preservation, and a strong respect for liquidity. When managing fixed income portfolios, we employ diverse sources of alpha and use investment strategies that are adaptable to suit the prevailing market environment. We believe this flexible approach results in a more consistent performance outlook through the cycle.

Key features

Differentiated approach

  • Over the years, we have performed extensive research into index enhancing which highlights the importance of genuine low-risk enhancing strategies to achieve consistent outperformance.

True-to-label enhanced fixed income

  • Our investment approach replicates the key characteristics of the benchmark before utilising sector rotation and security selection strategies to generate alpha, resulting in portfolios that remain aligned to the benchmark and are not structurally overweight certain components such as credit.

Proven performance

  • Through our differentiated investment approach, the strategy has delivered a 25 year track record of consistent outperformance through market cycles.1

Access to investment expertise

  • The strategy is managed by one of Australia's largest fixed income managers, providing access to the expertise of more than 60 investment professionals across our global locations.

1As at 31 March 2024, before fees. Past performance is not a reliable indicator of future performance. Strategy performance is available upon request.

Process

In managing enhanced Australian fixed income, we believe it is important to deliver excess returns without materially differing from the risk profile of the index. In practice, this means focusing on security selection and capitalising on relative mispricings, while matching the credit profile and duration of the index.

The strategy partially replicates the index before seeking to add alpha by combining low-risk security selection in government and credit with sector rotation.

Sector rotation:

Strategic level of credit exposure and allocation to government, semi-government and corporate sectors for the portfolio set based on where we are in the investment cycle.

Security selection:

Fundamental analysis of credit issuers and proprietary relative value models provide the framework for selecting which securities are attractive for the strategy.

Management team


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Risks

All investments carry risk. Different investments carry different levels of risk, depending on the investment strategy and the underlying investments. Generally, the higher the potential return of an investment, the greater the risk (including the potential for loss and portfolio value variability over the short term).  Some of the significant risks of the Strategy are included below. 

Investment risk: The Strategy seeks to generate higher returns than traditional cash investments. The risk of an investment in the Strategy may be higher than an investment in a typical bank account or term deposit. Distributions may fluctuate, as may the Strategy’s value. The value may vary by material amounts, even over short periods of time. 

Income securities risk: The Strategy may have exposure to a range of income securities. The value of these securities may fall, for example due to market volatility, interest rate movements, perceptions of credit quality, supply and demand pressures, a change to the reference rate used to set the value of interest payments, market sentiment, or issuer default. These risks may be greater for securities offering higher returns. Income security risk may cause volatility and/or financial loss to a Strategy. 

Interest rate risk: The value of the investments that the Strategy has exposure to will generally be sensitive to changes in market interest rates. In addition, changes to reference rates may impact the value of your investment in a Strategy. The Strategy may take active interest rate positions, either through physical security selection or through derivatives. Movements in market interest rates may impact the value of your investment in the Strategy. 

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Macquarie Asset management is a leading global asset manager offering a diverse range of investment solutions, including real assets, real estate, and credit.

 

This information is a general description of Macquarie Asset management only. The views expressed in this website represent those of the relevant investment team and are subject to change. No information set out above constitutes advice, an advertisement, an invitation, a confirmation, an offer or a solicitation, to buy or sell any security or other financial product or to engage in any investment activity, or an offer of any banking or financial service. Some products and/or services mentioned on this website may not be suitable for you and may not be available in all jurisdictions.

 

Investing involves risk including the possible loss of principal. The investment capabilities described in this website involve risks due, among other things, to the nature of the underlying investments. All examples herein are for illustrative purposes only and there can be no assurance that any particular investment objective will be realized or any investment strategy seeking to achieve such objective will be successful. Past performance is not a reliable indication of future performance.

 

Before acting on any information, you should consider the appropriateness of it having regard to your particular objectives, financial situation and needs and seek advice.

 

Other than Macquarie Bank Limited ABN 46 008 583 542 (“Macquarie Bank”), any Macquarie Group entity noted in this website is not an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia).  The obligations of these other Macquarie Group entities do not represent deposits or other liabilities of Macquarie Bank.  Macquarie Bank does not guarantee or otherwise provide assurance in respect of the obligations of these other Macquarie Group entities.  In addition, if this website relates to an investment, (a) the investor is subject to investment risk including possible delays in repayment and loss of income and principal invested and (b) none of Macquarie Bank or any other Macquarie Group entity guarantees any particular rate of return on or the performance of the investment, nor do they guarantee repayment of capital in respect of the investment.

 

Additional important information (including regional disclosures)

 

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