Active Sovereign Bond Strategy

The Coolabah Active Sovereign Bond Fund (ASBF) aims to generate excess returns above its benchmark through exploiting relative value mis-pricings in high quality government bonds and related derivatives that have a low correlation to equity markets, credit markets and the level of interest rates.

The strategy is actively managed and aims to take advantage of attractive risk adjusted relative value opportunities that are expected to mean-revert towards an estimated fair-value, offer an attractive risk-adjusted yield, or a combination of both.

The Fund’s investment strategy is managed as a single pool but offers investors the ability to choose between two different interest rate exposures by investing in either the Zero Duration Class or the Long Duration Class. Each class has exposure to the main pool but offers a different level of interest rate risk which may affect its returns and be suitable for different interest rate environments. Interest rate risk is the risk that changes in interest rates can have on the value of your investment.

The Zero Duration Class (ETL9561AU) aims to deliver the Fund’s investment strategy over its Benchmark, the RBA Overnight Cash Rate. It offers a floating interest rate exposure resulting in low or near-zero interest rate risk.

The Long Duration Class (ETL5578AU) aims to deliver the Fund’s investment strategy over its Benchmark, the Bloomberg AusBond Treasury 0+ Yr Index. It offers fixed-rate bond exposure by matching its interest rate duration to that of the Index, which may be a source of interest rate risk. For further information on interest rate risk see Section 6 in the Product Disclosure Statement (PDS).

Investors can switch between the Zero Duration Class and Long Duration Class, depending on their view on the future movement of interest rates. Switches do not incur an Entry or Exit Fee or Buy/Sell Spread.

Investments

ASBF actively invests in a portfolio of high quality government bonds predominately issued by the Australian Commonwealth Government and related derivatives, and has a target portfolio credit rating of AAA.

While it also has the capacity to invest in bonds issued by the New Zealand and G7 governments, including Canada, France, Germany, Italy, Japan, the United Kingdom, the United States and the European Union, there are no current plans to do so for the foreseeable future.

ABSF invests in AAA rated Commonwealth bonds, which are used as the benchmark for the risk-free rate over time. While bank deposits have a AAA rated government guarantee, this caps out at $250,000.

Applying a diverse array of quantitative asset pricing techniques, ASBF’s portfolio managers seek to generate profits over and above the yield provided by the underlying fixed-income assets, by actively exploiting bond mispricings.

ASBF can use derivatives to implement the investment strategy and to hedge risks such as interest rate, currency and macro risks, and is permitted to borrow, use leverage and short sell to enhance alpha (or profits). Its use of derivatives, borrowing and shorting may result in the Fund being geared.

ASBF does not invest in state government bonds, bank bonds, corporate bonds, hybrid securities, equities, or property. It only invests in AAA rated Commonwealth bonds.

The Fund is not a bank deposit. 

It is a managed investment scheme registered and regulated by the Australian Securities and Investments Commission (ASIC).

All investments carry risks, including that the value of investments may vary, future returns may differ from past returns, and that your capital is not guaranteed. The Fund can take long and short positions, borrow and use derivatives, meaning the Fund is geared (or leveraged). Leverage can amplify gains and also amplify losses. 

To understand the Fund’s risks better, please refer to the detailed “Risks” section in the PDS and to the Fund’s Target Market Determination (TMD)^.