InvestSMART Hybrid Income Portfolio Update - December 2018
Despite a weaker and volatile equity market and widening credit spreads, the hybrid market experienced positive momentum in the final month of the year. We expect this to continue in coming months. During the month, we reduced the portfolio’s exposure to CBAPG, CBAPD, CBAPE and NABPB to raise cash for the new allocation into WBCPI.
We reduced the portfolios exposure to CBAPG, CBAPD, CBAPE and NABPB to raise cash for the new allocation into WBCPI. The allocation is cash is 4.2%, above its minimum 2% weight. During the quarter, the best performers were CBAPE ( 2.29%), MQGPB ( 1.99%) and IANG ( 2.06%). The two major detractors for the quarter were MBLHB (-1.53%) and NABHA (-2.0%).
The hybrid market experienced positive momentum in the final month of the year. This followed over $1 billion of redemptions in the listed fixed Interest and hybrid space. Currently there is only one major bank hybrid approaching its optional call date, being NABPA which has a call date in March 2019.
The supply and demand dynamics favour a positive outlook over the next 6 months as investors cautious of continuing volatile equity markets together with the risk of a falling RBA cash rate as suggested by the Australian interest rate futures market look to further diversify portfolios into the hybrid asset class.
Axcesstoday (AXL) announced on 12 December that It would continue its voluntary suspension. AXL requires further time to complete the process of working with its lenders, finalising the strategic review and completing a successful equity raise. At 31 December 2019, the portfolio’s current weighting in AXLHA is ~ 1.60%.
To see more information on our Hybrid Portfolio, click here.
Frequently Asked Questions about this Article…
The hybrid market experienced positive momentum in the final month of the year, and this trend is expected to continue in the coming months. The supply and demand dynamics are favorable, especially as investors seek to diversify portfolios amid volatile equity markets and potential interest rate changes.
The portfolio reduced exposure to CBAPG, CBAPD, CBAPE, and NABPB to raise cash for a new allocation into WBCPI. This strategic move was part of managing the portfolio's exposure and optimizing returns.
During the quarter, the best performers in the portfolio were CBAPE with a return of 2.29%, MQGPB with 1.99%, and IANG with 2.06%.
The major detractors for the quarter were MBLHB, which saw a decline of 1.53%, and NABHA, which decreased by 2.0%.
NABPA is the only major bank hybrid approaching its optional call date, which is in March 2019. This is significant as it may impact the supply dynamics in the hybrid market.
The portfolio's cash allocation is currently at 4.2%, which is above its minimum weight of 2%. This provides flexibility for future investments and adjustments.
Axcesstoday (AXL) announced on 12 December that it would continue its voluntary suspension. The company is working with lenders, finalizing a strategic review, and completing an equity raise.
For more detailed information on the Hybrid Portfolio, you can click on the provided link in the article to access further insights and updates.
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