Coolabah Capital Investments’ has one of the largest local investment-grade fixed-income teams with 26 executives, including 5 portfolio managers and 13 analysts (with 4 PhDs), committed to delivering its investors active credit “alpha” rather than simply chasing yield by assuming more risk (or “beta”). This alpha is extracted by relentlessly exploiting bond mispricings identified via unique quantitative research capabilities that use artificial intelligence, amongst other advanced methods…
The intellectual edge: Making Every Basis point count
Coolabah Capital Investments (CCI) is a leading active credit alpha generator that is responsible for managing numerous institutional mandates, the Smarter Money Investments’ product suite, and the BetaShares Active Australian Hybrid ETF (ASX: HBRD). CCI manages over $6 billion as at April 2021.
CCI’s edge is in “alpha” generation in liquid, high-grade credit in contrast to traditional fixed-income strategies that drive returns through chasing yield by adding more interest rate duration risk, credit default risk, and/or illiquidity risk (called “beta”).
This alpha is a function of the world-class analytical insights rendered by CCI’s human capital, which includes 26 executives with a long-term track-record of delivering prescient macro and quantitative insights. In 2019, CCI’s portfolio managers were selected as one of FE fundinfo’s Top 11 “Alpha Managers” based on their risk-adjusted performance across all asset-classes. Click on the below video to learn more about CCI’s philosophy, people and products…
- One of the largest fixed-income investment teams, including 13 analysts, 5 portfolio managers, and 26 executives (including 4 PhDs) across Sydney, Melbourne and London focused on pure alpha generation
- One of the most active fixed-income investors, trading more than $25 billion in physical bonds in 2020 across the capital structure, including approximately $1 billion of trades in bank bonds and hybrids in the difficult month of March 2020
- Among the deepest quantitative credit research capabilities, which searches for bond mispricings globally using differentiated techniques, including artificial intelligence (see our published research here)…
Coolabah's LONG-SHORT CREDIT FUND (LSCF)
DAILY LIQUIDITY, SHORT DURATION, AV. AA- RATING
CCI’s near-zero duration, daily liquidity Long Short Credit Fund (LSCF) targets returns above the RBA cash rate plus 4% to 6% pa over rolling 3 year periods after fees with volatility of less than 5% pa.
LSCF harnesses CCI’s active credit alpha style that focusses on systematically exploiting mispricings to generate capital gains (alpha) in addition to yield. By doing so, LSCF seeks to deliver credit alpha that is mostly uncorrelated with traditional fixed-income, equities and property and broadly unrelated to interest rate duration risk, credit risk and/or illiquidity risk.
LSCF can also opportunistically profit from both bond price rises and falls through-the-cycle by going both long or short mispricings.
Since inception LSCF has outperformed the HFRI Credit Hedge Fund and the Bloomberg Credit Hedge Fund Indices net of fees.
LSCF is available to both institutional and retail investors, listed on numerous platforms, and rated by independent researchers, including Lonsec, Atchison and Australia Ratings.
LSCF is typically classified in the unconstrained fixed-income, high-yield, or defensive alternatives universes.
- Active alpha: 8.0% to 8.2% net retail return (11.2% gross) last 12 mths*
- Investment-grade: Daily liquidity, near-zero duration, av. AA- credit rating, available to retail and institutional investors
- Risk-managed: Since inception volatility of 3.20% pa
*Past performance does not assure future returns. Returns are shown over 12 months to 28 February 2021 and quoted after all fund fees. The Smarter Money Long-Short Credit Fund has returned 5.31% to 5.43% p.a. net of all fees since inception on 31 August 2017. Retail product fees can vary depending on the unit class selected and/or whether the financial advisory firm has negotiated access to lower cost unit classes. Return volatility is shown since inception in August 2017.
COOLABAH'S SMARTER MONEY HIGHER INCOME STRATEGY
DAILY LIQUIDITY, SHORT DURATION, AV. A+ RATING
CCI’s near-zero duration, daily liquidity Smarter Money Higher Income Fund (SMHI) targets returns above the RBA cash rate plus 1.5% to 3.0% pa after all fees with an average A target credit rating.
SMHI is a daily liquidity solution that invests in cash and fixed-income assets that are hedged to a floating-rate (ie, not fixed-rate) exposure that means it has near-zero interest rate (duration) risk.
SMHI actively invests in a portfolio of Australian cash securities and bonds with a target dollar-weighted average credit rating in the “A” band. SMHI does not invest in fixed-rate bonds (unless interest rate risk is hedged out) or equities. SMHI is not permitted to use leverage.
It ranks No1 in FE fundinfo’s Cash Enhanced universe over the last 1, 3 and 5 years as at February 2021 and has also received a 5 Crown Rating. Please read more about the rating and disclaimer here. Past performance does not assure future returns and investors should read the PDS to better understand this strategy’s risks.
- Active alpha: 3.15% to 3.30% net retail return (4.42% gross) last 12 mths*
- Investment-grade: daily liquidity, av. A+ credit rating
- Risk managed: since inception volatility of 0.91% pa
This is an interview published on Livewiremarkets.com recently with Jason Lindeman, Head of Credit Research at Coolabah Capital Investments.
Jason has seen some unusual things in his three decades managing credit. From Argentinian gaming companies operating from river boats, European and UK poultry farms when bird flu first hit, an Italian dairy company with fraudulent bank statements, Bulgarian steel plants, and a CFO who was apprehended at an airport with $500k in his suitcase, it’s safe to say he’s a hard man to surprise. But upon returning to Australia and taking a position at Coolabah, he said he was blown away by the intensity and depth of the due diligence process. Lindeman also reveals that Coolabah uses artificial intelligence to rate every bond globally, and has traded actively on these unique insights.
- Don’t search for yield, search for mispricings.
- Focus on minimising risk, look for implicit government guarantees such as ‘too big to fail’ institutions.
- Never forget the definition of credit quality: “the ability of an entity to withstand both internal and external shocks.” Avoid companies that can’t withstand shocks.
cOOLABAH'S ACTIVE COMPOSITE BOND STRATEGY
DAILY LIQUIDITY, LONG DURATION, AV. AA- RATING
CCI offers a range of zero-duration and long-duration active credit alpha solutions for institutional investors. In the long-duration domain, CCI’s flagship institutional solution is the Active Composite Bond Strategy.
The Active Composite Bond Strategy seeks to deliver superior risk-adjusted returns to the AusBond Composite Bond Index through harnessing CCI’s active credit alpha style that focusses on systematically exploiting mispricings to generate capital gains in addition to yield.
The Active Composite Bond Strategy ranks in the top 2 strategies in Mercer’s Australian fixed-income (active) universe over the last 3 years.
The Active Composite Bond Strategy is an institutional-only product with confidential fee terms that is not available to retail investors.
- Active alpha: 5.8% gross return last 12 months vs AusBond Composite Bond Index’s 1.7% (since inception return of 7.0% pa vs AusBond Composite Bond Index’s 4.8%)*
- Investment-grade: daily liquidity, av. AA credit rating, 3.96 years duration
- Risk managed: since inception volatility of 3.3% pa
Disclaimer: Past performance does not assure future returns. Returns are shown over 12 months to 28 February 2021 and quoted after all fund fees for retail products. Fees are individually negotiated for institutional strategies. Retail product fees can vary depending on the unit class selected and/or whether the financial advisory firm has negotiated access to lower cost unit classes.
Equity Trustees Limited (Equity Trustees) ABN 46 004 031 298 AFSL 240975, is the responsible entity for the Smarter Money Long-Short Credit Fund (LSCF) and the Smarter Money Higher Income Fund (SMHI). Equity Trustees is a subsidiary of EQT Holdings Limited ABN 22 607 797 615, a publicly listed company on the Australian Securities Exchange (ASX: EQT).
This publication has been prepared by Coolabah Capital Investments (Retail) Pty Ltd (Coolabah), an authorised representative of Coolabah Capital Institutional Investments Pty Ltd ABN 85 605 806 059 AFSL 482238, to provide you with general information only. In preparing this publication, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. The Product Disclosure Statement (PDS) for the Fund should be considered before deciding whether to acquire or hold units in it. A PDS for the Fund can be obtained by visiting www.coolabahcapital.com. Neither Coolabah, Equity Trustees nor any of their related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. The Fund is subject to investment risks, which could include delays in repayment and/or loss of income and capital invested.