The main positive contributor was the Macquarie Income Opportunities fund, which gained 1.0%, which is largely invested in floating rate securities..
Rate rises have the effect of increasing yields on new bond issues, but will also lower the capital value of existing bonds if they are sold in the secondary market. However, the key advantage of fixed interest is that it provides capital security and a regular income stream, and provided the bond is held to maturity, the capital value will be preserved.
One key change that we have made to the Fixed Income portfolio is that we have sold the Vanguard Australian Fixed Interest ETF and replaced it with the iShares Core Composite Bond ETF (which is up 0.3% since being added).
The iShares Core Composite Bond ETF is invested in a highly diversified, low risk, portfolio of bonds. Around 90% of the ETF is invested in Treasury and Government related bonds, with 9% invested in corporate bonds. It currently has an average yield to maturity of around 2.5% a year and has an average maturity of 5.9 years.
|PERFORMANCE TO 31 MARCH 2017||1 MONTH||3 MONTHS||6 MONTHS||1 YEAR||SI* (P.A.)|
|InvestSMART Fixed Income Portfolio||0.27%||0.85%||-0.73%||1.88%||2.06%|
|Bloomberg AusBond Composite 0 Yr Index||0.44%||1.23%||-1.67%||2.09%||3.94%|
|Excess to Benchmark||-0.17%||0.38%||0.94%||0.21%||-1.88%|
Source: Praemium, RBA. Returns are after investment fees and admin fees. Returns are shown as annualised if the period is over 1 year. * Since Inception (SI) date is 30 December 2015.
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