We conduct a monthly outlook of potential macro drivers of AUD credit spreads. The process uses both national and international influences. These drivers include both fundamental and technical issues. This view is then compared against the current positioning of the fund.
Specifically the following factors are to be reviewed:-
– The credit spread duration of funds;
– The interest rate duration of funds;
– Sector concentrations;
– Credit rating concentrations;
– Security type concentrations.
For each security the expected 12 month total credit return is calculated and then compared to the risk taken. The calculation is driven by a 12 month credit spread target. This target considers factors such as expected wider market credit spread direction, sector influence, changes in issuer credit fundamentals and existing relative value.
The historical and potential secondary market liquidity of each security of the portfolio is assessed. This, in conjunction with the expected maturity profile of the portfolio, is used to assess the funds’ liquidity profile. The overall fund is managed to deliver the liquidity needs of our investors.
A daily review by the Spectrum team of security performance, news, results and other factors that potentially could influence the prices of securities the fund owns or could own.
A weekly meeting of staff where the following are discussed and assessed whether the portfolio should be adjusted:
– Any recent annual credit reviews of existing issuers and securities;
– Any material new developments relating to issuers in the portfolio. For example results, ratings upgrade, regulatory developments, legal issuers and management changes;
– Potential investment ideas for secondary and primary securities;
– A review of weekly performance of the relevant securities universe and associated equity price movements.