Credit

Core Australian Fixed Interest

Overview

An alternative approach

Our research shows that utilising diversified sources of alpha rather than depending on large duration bets or credit beta allocations provides a higher consistency of excess returns than traditional core strategies.

Adaptable strategy

Our investment strategies are adaptable to match the market environment and seek to capitalise on the best opportunities available.

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

Dynamic approach

We employ diverse sources of alpha and use investment strategies that are adaptable to suit the prevailing market environment and capitalise on the best alpha opportunities available.

Clear investment philosophy

Our investment philosophy shapes our investment processes, focusing on managing the downside with a strong respect for liquidity, which are critical for a fixed income portfolio.

Proven performance

Through the cycle, our Core Australian Fixed Interest strategy has consistently delivered stronger longer-term performance versus its benchmark and peers¹

¹Source: Mercer. Based on 5-year rolling annualised returns (before fees) over 5 annual periods to 30 November 2023. Comparison with the Mercer Australian Fixed Income (Active universe). Benchmark is the Bloomberg AusBond Composite 0+Yr. Past performance is not a reliable indicator of future performance. Strategy performance is available upon request.

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.

Process

The Macquarie Fixed Income team employs a disciplined investment approach, utilising rigorous proprietary processes and the full spectrum of opportunities available in Australian fixed income.

The strategy is underpinned by four distinct alpha sources – sector rotation, duration, security selection, and dynamic alpha. Each is individually managed using its own proprietary processes and models, backed by robust research. Overall portfolio construction draws on these four alpha sources, with flexible investment ranges helping to protect against risks.

Ultimately, this approach seeks to provide investors with diversified sources of return and greater opportunities to maximise long-term performance through the cycle.

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.

Duration:

Utilises robust proprietary processes to focus on factors that affect short- and medium-term moves in interest rates to generate a combination of strategies and positions rather than single large duration positioning.

Security selection:

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

Dynamic alpha:

The dynamic alpha component of our strategy refers to a range of flexible strategies that can be adapted to opportunities in the market. In many cases, market dislocations caused by imbalances from market participants often lead to low-risk opportunities, which we would take advantage of.

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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