Australian Fixed Income

Our investment team, based locally in Australia, are experts in their fields and communicate their ideas through our proprietary technology platform, the Investment Opinion Network (ION). This, as well as support from our global credit research team, has established a transparent, collaborative and research-based investment culture allowing them to capture a wide range of return drivers.

We take a balanced risk approach where we build portfolios in a balanced and diversified manner (where one particular view does not dominate) which increases the likelihood of accomplishing portfolio objectives. Through our extensive credit research process our analysts identify ESG risks during their bottom-up credit research.

Investment Philosophy and Approach

The investment philosophy is one of a Balanced Risk Approach. By ensuring that portfolios are built in a balanced and diversified manner – where one particular view does not dominate – we increase the likelihood of accomplishing portfolio objectives. We believe long-term, repeatable investment performance is achievable when quality control methods are applied to each element of an investment process. Without measurable standards, investment results lack sufficient transparency making repeatable results unlikely.

To deliver on our Balanced Risk Approach, we benefit from unconstrained idea-based investing, meaning that we seek to source a rich variety of ideas from our global platform, subject to fund objectives and constraints. We believe continuous, free-form idea generation that is independent of an overarching “house view,” generates a diverse pool of uncorrelated alpha sources that, when compared and measured, deliver superior outcomes. 

Our investment process is actually of a series of independent research processes, supporting an independent design and portfolio construction process, all enveloped and overseen by our portfolio management team. Idea generation and associated research processes are intentionally decoupled from the portfolio construction process: this allows process management to better specify, manage, and improve our research processes, the driver of returns for the portfolios we manage.

"We believe long-term, repeatable investment performance is achievable when quality control methods are applied to each element of an investment process. Without measurable standards, investment results lack sufficient transparency making repeatable results unlikely."

Team Profile

Based in Sydney, Australia our experienced team of Australian Fixed Income specialists has a long track-record of working together and investing across the global fixed income universe, seeking to deliver attractive risk-adjusted return. The team draws on the wealth of knowledge and resources from specialist across our global fixed income platform; blending together global opportunities to achieve our clients’ objectives. The team is led by Stephen Cooper, Head of Australian Fixed income, who has over 20 years’ experience and has been with the firm for over 4 years.

9
16
yrs
7
yrs

Stewardship And ESG Integration

In the Australian fixed income space, the Environmental, Social and Governance (ESG) assessment most often comes through its impact on the internal rating provided by the Credit Analysts via our Credit Research process. The portfolio management team then use this to assess relative value when compared to other similarly rated issuers. For example, ESG considerations in the automotive industry have led to our internal rating for some issuers being lower than that of the external rating agencies. As a result, the risk-reward assessment has often been decided such that we are underweight that sector in our active Australian fixed income portfolios.

Outside of this channel, ESG considerations are also positively incorporated in our investment decision for bonds that have been issued for Socially Responsible purposes. We have recently been actively involved in Green Bond issuance from Queensland Treasury Corporation and the Commonwealth Bank of Australia, as well as the Gender Equality bonds issued by National Australia Bank.

In these instances, the ESG benefits act as an important offset to the lower liquidity that these typically smaller bond lines can encounter. These benefits result in increased demand in the secondary markets, thereby boosting prices and lowering yields, ceteris paribus. Without this consideration, we would not look to actively overweight Socially Responsible focused investments as we have in the recent past, which demonstrates the opportunity for fixed income investors to use ESG factors to broaden the set of investment opportunities.

"We have recently been actively involved in Green Bond issuance from Queensland Treasury Corporation and the Commonwealth Bank of Australia, as well as the Gender Equality bonds issued by National Australia Bank."

Investment Information And Performance

Performance  

% of the team’s portfolios outperforming their relevant benchmark over three years *
15.81%
Weighted average of outperformance *
(Three years annualised. Weighted by size of fund)
-0.51
Absolute return over three years (to 31/12/2016)
Wholesale Australian Bond Fund**
4.28%

Performance and investment characteristics are as at 31/12/2016
Performance is quoted pre-fees and in $A terms. Investors in other currencies will be subject to exchange rate fluctuations which will affect investment returns.
Past performance is not indicative of future performance.

Source: First State Investments
*Includes all funds and segregated accounts managed by any entity within Colonial First State Global Asset Management. Not all funds and accounts are registered or available in all jurisdictions. This may not be representative of your jurisdiction.
**This Fund has been selected as representative of the strategy but this may differ across the other funds and accounts within the same strategy.
Please follow this link for information on how our RI and Stewardship Measures are calculated. 

Investment characteristics 

Credit rating breakdown - Wholesale Australian Bond Fund

Source: Calculated by BRS Aladdin using data from Moody’s, S&P and CFSGAM

Sector breakdown - Wholesale Australian Bond Fund

 Source: First State Investments

Please follow this link for information on how our RI and Stewardship Measures are calculated.