Coolabah Capital Investments Pty Ltd (CCI) is an independent long and long-short active credit manager founded in 2011 and chaired by experienced super fund director Melda Donnelly.
CCI is 75% owned by its investment team and 25% owned by the $72 billion boutique specialist investor, Pinnacle Investment Management. CCI owns 100% of the retail fund manager, Smarter Money Investments Pty Ltd (SMI). CCI is responsible for managing SMI’s portfolios, the BetaShares Active Australian Hybrids ETF (ASX: HBRD), and numerous other institutional mandates worth $5 billion in FUM as at December 2020.
Pinnacle’s mission is to establish, grow and maintain a diverse stable of world-class investment managers. It holds equity interests in 16 specialist investment managers, including Coolabah Capital Investments, and provides them with a comprehensive range of high quality and cost effective infrastructure and other support services.
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. In 2016 SMI was a finalist for Money Management / Lonsec’s “emerging fund manager of the year” award.
SMI’s first active short-term fixed-interest solution, the Smarter Money strategy (SMF), was launched in February 2012. SMI’s second active credit solution, the Smarter Money Higher Income (SMHI) strategy, was publicly launched on 1 October 2014. SMI’s absolute return hedge fund solution, the Long Short Credit Fund (LSCF), was launched on 1 September 2017. The BetaShares Active Australian Hybrids ETF (ASX: HBRD) was listed on the ASX on 13 November 2017.
CCI offers institutional clients a rich range of customised mandate-based solutions.
CCI’s edge is in generating “alpha” by exploiting mispricings in liquid, high-grade credit in contrast to traditional fixed-income managers that drive returns through adding more interest rate duration, credit default, and/or illiquidity risk (known as “beta”). This alpha generation is itself a function of the world-class analytical insights rendered by CCI’s human capital, which comprises five portfolio managers, thirteen analysts, and numerous other finance, risk, compliance, operations and product staff (26 in total as at January 2020).
CCI’s unique analytical and quantitative capabilities are recognised in Australia and overseas as the basis for unusually high win ratios and prescient projections. CCI’s leadership is often called on to advise government on complex economic policy formulation. CCI’s chief investment officer co-developed the ideas for the Australian government to invest in the residential mortgage-backed securities (RMBS) market during the global financial crisis and more recently the SME asset-backed securities (ABS) market. In 2018 CCI developed the world’s first hedonic index of RMBS default rates. In 2020 CCI formulated unique COVID-19 forecasting models that correctly predicted the early April 2020 peak in the first COVID-19 waves in Australia, Europe and the US months ahead of epidemiologists’ estimates.
CCI’s macro forecasting prowess is well documented and has included, amongst other things, accurately predicting well ahead of other analysts: the housing boom between 2013 and 2017; the record housing correction between 2017 and 2019; the otherwise unexpected upgrade of Australia’s sovereign credit rating to AAA “stable” in 2018; the sharp housing recovery in May 2019; the early return of the Australian federal budget to surplus in 2019; the shock outcome of the 2019 Federal election; the retention of franking credits on hybrid securities; the upgrade of the four major banks’ senior bonds to AA- “stable” in 2019; the upgrade of Australia’s economic risk score in 2019; the upgrade of the major banks’ stand-alone credit profiles from “a-” to “a” in 2019; the unanticipated upgrade of the major banks’ hybrids from a high yield BB+ rating to an investment-grade BBB- rating in 2019; the upgrade of the major banks’ subordinated Tier 2 bonds from BBB to BBB+ in 2019; the early April 2020 peak in the first COVID-19 infection waves in Australia, Europe and the US; the peak in the second COVID-19 wave in Victoria in late July 2020; and the much smaller than expected 0% to 5% correction in Australian house prices between March and September 2020 followed by the rebound thereafter.
CCI defines active strategies as those that seek to identify assets that are cheap relative to rigorous quantitative assessments of fair value and which have a high likelihood of converging back to fair value and thus furnishing superior risk-adjusted returns.
CCI has built significant comparative advantages in extremely active asset-selection, top-down and bottom-up quantitative bond pricing methods, unique quantitative research that renders alpha-generating insights (including the use of artificial intelligence), intensive financial and commercial due diligence, and the minimisation of both credit and interest rate duration risks.
CCI believes that there is a significant role for liquid, low duration active credit alpha exposures to play in both individual and institutional portfolios, especially in a world where interest rates are very low and duration risks are unusually elevated.
CCI’s institutional funds management team encompasses over 26 executives as at January 2021, including five portfolio managers, thirteen analysts, and a large number of finance, risk, operations, and product staff across CCI’s Sydney, London and Melbourne offices.
CCI’s Investment Committee and Audit, Compliance & Risk Committee is chaired by the experienced funds management and superannuation executive, Ms Melda Donnelly, who is supported by Mr Robert Henricks. CCI also has an extensive Product & Sales Team comprising a further four full-time professionals. Senior executive bios for the investment, operations, finance and risk teams are are available below.