InvestSMART Hybrid Income Portfolio Update - December 2018

Portfolio produced a return of 0.53% (after fees) during the December quarter and no changes were made

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

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