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Zenith Awards Coolabah’s Floating-Rate High Yield Fund a ‘Recommended’ Rating

This week Zenith Investment Partners awarded Coolabah’s Floating-Rate High Yield Fund a ‘Recommended’ investment rating.

The Smarter Money Fund (Base Fee), Smarter Money Higher Income Fund (Base Fee) and Smarter Money Long-Short Credit Fund (Institutional) also retained their ‘Recommended’ ratings.

Zenith comments that “Combining a mix of quantitative and qualitative inputs, Coolabah uses leverage and a high turnover trading approach to generate capital gains and deliver absolute returns. Zenith considers Coolabah’s approach of leveraging investment grade, highly liquid securities, to be an intuitive form of yield enhancement, potentially offering ‘high yield’ like returns with less attendant volatility and drawdown risk…In our opinion, leveraging investment grade securities can produce superior Sharpe Ratio outcomes relative to investing in sub-investment grade, longer-dated Corporate Securities, where there is higher default and mark-to-market volatility risk.” 

Further insights from Zenith included: 

“Leading Coolabah’s 20 person investment team is Sydney-based Christopher Joye, Chief Investment Officer (CIO) and Senior Portfolio Manager. Joye is supported by a Portfolio Management Team (PMT), which is the principal decision-making body for setting the Fund’s positioning and all security-level decisions. In Zenith’s opinion, Joye is a strong investor, who has developed an innovative and differentiated approach to managing Fixed Income portfolios. 

The investment process is underpinned by a suite of 30 to 40 quantitative models, that seek to identify mispriced securities. These can be driven by a range of factors including relative value opportunities across issuers, predicting ratings agency movements based on statistical techniques and using Merton models to calculate fair value. 

Zenith considers Coolabah’s top-down models to be a highly efficient mechanism to monitor and distil the investable universe, to form a potential list of attractively priced securities. A number of models have a forward-looking focus, seeking to forecast the behaviour of other market participants. These predictive indicators can provide valuable insights, particularly for those securities where the market has been slow to recognise changing credit fundamentals. 

Coolabah’s primary source of excess returns is captured through capital gains, or holding bonds that offer spread or yield compression trading opportunities. This is achieved through highly active trading for relatively short holding periods, with portfolio turnover typically around 300% p.a. to 400% p.a.” 

Please contact us for a copy of the report. 


Ratings & Research Disclaimers

The Zenith Investment Partners (ABN 27 103 132 672, AFS Licence 226872) (“Zenith”) rating (assigned ETL5010AU June 2023) referred to in this piece is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual, including target markets of financial products, where applicable, and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at Fund Research Regulatory Guidelines.

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