Performance Summary
Firstmac’s expertise in Residential Mortgage-Backed Securities has seen over $29 billion in RMBS issued since 2003. High Livez gives everyday investors access to this market, which is usually restricted to institutional investors.
Fund performance to 31 January 2021
We are pleased to report that our High Livez fund’s unit price was relatively unchanged month-on-month, declining slightly from $1.0525 last month to $1.0514 in January.
The Unit Price bottomed in March 2020, at the height of Covid-19 fears, when it fell to $1.0342.
The Residential Mortgage-Backed Securities (RMBS) that High Livez invests in remain in strong demand and this is reflected in the strength of our unit price. We anticipate strong demand continuing in the near term.
The fund achieved a distribution return for the month of January of 3.08% per annum, which was a solid 3.05% above the official cash rate of 0.03%. The official cash rate was reduced to a target of 0.10% in early November, 2020.
The Total Return for the past 9 years was 5.37% per annum consisting of 4.88% annualised distribution return and 0.49% annualised capital growth.
Underlying RMBS performance has been excellent, buoyed by the recovery of Covid-19 deferred mortgages as reported by a broad range of lenders across the industry.
The Investment Committee is comfortable with our positions and we do not anticipate any adverse performance arising following the end of the JobKeeper payment from 31 March 2021.
High Livez Performance
For the month of January 2021, the fund achieved a distribution return of 3.08% per annum, bringing the Total Return for the past nine years to 5.37% per annum.
Australian Economic Update
Australian economic indicators released in January showed more signs of recovery. Preliminary December retail sales fell 4.2% month-on-month but were up more than 9% year-on-year, while November housing finance commitments rose by 5.6% month-on-month and were up more than 30% year-on-year. December employment rose 50,000 in line with market forecast but the unemployment rate fell more than expected to 6.6% (market forecast 6.8%) from 6.8% in November. The RBA met for the first time in 2021 and left its policy settings unchanged – cash rate; term funding rate; and 3-year bond yield target all 0.10% - and reaffirmed its commitment to easy policy conditions for the medium to longer term.
Australian Credit Markets
Overall, risk assets started the calendar year mixed. The ASX was slightly up from its December close, while the US stock markets were slightly down. The credit indices, which are synthetic products, were also a little weaker, with the Australian iTraxx index drifting wider by about 6 basis points over the month. Physical credit, products such as corporate bonds or subordinated bank debt, however, moved tighter during the month on the back of limited new supply and that the market has been effectively competing with central bank funding thus has being forced to bid tighter. Previously, this has exhibited itself in the higher-rated, more vanilla, assets tightening in but as investors start to reach for yield, January saw spreads on lower-rated corporates generally outperform.
Historical performance assumptions
*Total return for the 9 years to 31 January 2021 and 5.64% p.a. since inception on 29 March 2011. The total return is the trust’s consolidated performance over the period referenced. Past performance is not indicative of future performance and should not be the only factor considered when selecting an investment. Performance is calculated on an initial investment for $10,000 with distributions reinvested. Ongoing fees and expenses have been applied however individual taxes are excluded. This information is general information only and does not take into account your individual objectives, financial situation or needs. You should assess whether the information is appropriate for you and consider obtaining financial advice prior to making an investment decision.
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