At the start of each trading period, the investment management team performs a top down analysis of the economic environment and the available marketable securities. This analysis identifies the economic outlook and the investment opportunities that exist within the universe of debt securities.

Using this, the team constructs an expected returns matrix and the investment opportunities are rated from best to worst. The best opportunities identified are then subjected to a worst case scenario analysis in order to calculate the worst case loss level. With this information, the level of risk is determined and a positive minimum income target established. In this way, it is possible in any one trading period to achieve the minimum income target more than once while never exceeding the pre-determined level of risk.

The team will then take advantage of the best investment opportunities in one or more of the following ways:

  1. By making direct investments in debt securities with the intent of holding those securities until their theoretical value is realised
  2. By exploiting the yield spread between the two different classes of debt issue for a similar maturity
  3. By exploiting the yield spread between two securities with different maturity dates but the same issuer

In this way, the Fund exploits opportunities in credit risk, credit spread risk, and single borrowing risk.

An example of the style of investment the fund will examine in the context of the current economic environment is buying five year investment grade mortgage backed securities.

We constantly monitor the ever changing economic and financial environment, identifying and capturing new opportunities in debt markets as they emerge. If, from time to time, the fund cannot identify any investment that satisfies its risk return parameters, it will hold resources in risk free securities, such as short dated Treasury Bonds, until an appropriate investment is found. With all investments, the downside risk will be measured, understood, and limited.

The process used to limit risk on any one investment involves quantifying the dollar amount of risk that should be taken and then setting stop loss orders or buying put and/or call options to limit exposure. In this way, the fund’s capital position should be protected from major loss.

See more on the fund’s investment philosophy.

Information on this website has been prepared by Supervised Investments Australia Limited ABN 45 125 580 305 AFSL 317155 (SIAL), and it does not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision.  All opinions and statements included on this website constitute SIAL’s judgement and are subject to change without notice.

SIAL does not guarantee the performance of the Funds or the repayment of any investor’s capital. To the extent permitted by law, SIAL, including it’s directors, senior executives, employees, consultants, advisers, officers or authorised representatives, are not liable for any loss or damage arising as a result of reliance placed on the contents of this website. SIAL only provides services to wholesale clients, as defined in section 761G of the Corporations Act. Past performance is not indicative of future performance.