Performance

Firstmac’s expertise in Residential Mortgage-Backed Securities has seen over $25 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 May 2020

The month of May 2020 has seen improving market sentiment following the COVID-19-driven disruptions of March.

The valuation of our fund’s investment holdings has improved over the course of the month and, as at the time of writing (early June), we expect this trend to continue.

Improving market sentiment is reflected in an improving High Livez Unit Price, increasing to 1.0376 at May 31 from 1.0347 at the prior month end.

Over the course of May, our High Livez Investment Committee has continued to raise the fund’s liquidity by selling some investment holdings of the fund.

These actions have ensured the ongoing strong liquidity position of our fund. This has, however, resulted in some realised losses on sale of those specific investment holdings compared to their original purchase price.

These realised losses offset the current month’s distribution return to some extent. The current month distribution return was an annualized 1.39%.

This single month’s distribution reduction is not reflective of the ongoing yield of the fund. Rather, we anticipate the monthly distribution returning to the fund objective of at least 3% per annum above the official cash rate next month.

Importance of The Fund’s Investment Horizon
The High Livez fund is a medium-term investment as described in the product disclosure statement. It is not suitable for short-term investments and it should not be used as a pseudo cash account. The fund’s objectives are to invest with a medium-term horizon so as to provide regular monthly income distributions. Maintaining additional liquidity in the fund would lower returns for those appropriately investing for the medium term.

Outstanding Results
The Total Return for the fund over the past 9 years has been 5.58% per annum, consisting of 5.26% distribution return, and 0.32% of capital growth.

High Livez’s Unit Price will rise and fall based on the underlying revaluation of RMBS investments held. The revaluation is determined by the relative value of the contracted interest coupon received on the invested note, compared with the interest coupon offered on new transactions.

At any given time, the interest coupon is determined by a new issuance supply/demand auction. As an example, one investment that our fund held included a Westpac issued RMBS WST 1-2020. This note has a contracted interest coupon of bank bills plus 0.98%. The coupon was contracted based on an auction process conducted in January 2020. However, given the current period of market stress, if Westpac was to issue a new transaction today, then the market would expect Westpac to pay an interest coupon of approximately bank bills plus 1.10%. Given this, the High Livez investment holding was of lower relative value compared to a new Westpac issuance that would pay a higher interest coupon. As such, the revaluation price for the Westpac 1-2020 note held fell to $99.43 where we sold it (it was $99.02 in April and $98.52 in March). This same revaluation approach is repeated across all of our fund’s investments and is reflected in the Unit Price.

Benefits of the Fund’s Diversification
The Fund’s investments are in pools of residential mortgages and therefore are not exposed to any financial institution. This is important from a credit perspective as it is the broader Australian economy that dictates the performance of our investments, and not the value of any financial institution.



Australian Economic Update

Australian economic indicators released in May showed a sharp fall in April economic activity at the height of Covid-19 restrictions. Preliminary April retail sales fell by a record 17.9% month-on-month, in part caused by the reversal of panic buying of groceries during March. Employment fell in April by 594,000 but the negative impact on the unemployment rate was softened by many choosing to exit the labour market. The unemployment rate rose to 6.2% in April from 5.2% in March. The RBA, after the emergency cash rate cuts to 0.25% and quantitative easing announced in March, left the cash rate unchanged at its April and May policy meetings but stated in May that low interest rates will persist for many months to come..

Australian Credit Markets

The credit markets continued to tighten during May, in line with the movements in other risk assets. The Australian iTraxx, which is a good proxy for domestic credit spreads, started the month at 116 basis points and finished around 100 basis points. Primary issuance also started to pick up, with Macquarie Bank issuing a Tier 1 bond into the listed market and a subordinated debt (tier 2) instrument into the over-the-counter market. The tier 2 bond was priced at 290 basis points over swap spreads and subsequently traded 10 basis points tighter in the secondary market. Spreads on Residential Mortgage Backed Securities (RMBS) have been very stable throughout the COVID-19 crisis, being well supported by the Australian Office of Financial Management.

Historical performance assumptions

*Total return for the 9 years to 31 May 2020 and 5.67% 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.

High Livez downloads

 

Direct Debit Request


 

Eureka Report


 

Financial Services Guide


 

Firstmac and RMBS


 

High Livez Financial Statement 2019

 

Firstmac High Livez Additional Investments

 

Firstmac High Livez SQM Report 2020

SQM Research provides independent assessment in managed funds to AFSL holders and their authorised representatives. SQM requires that you must be an AFSL holder or authorised representative to view this research.

      
 

Highlivez Performance Factsheet

 

Notice of change to the Constitution

 

Change of Compliance Plan Auditor
 

 

Change of External Dispute Resolution Scheme membership

 

Firstmac High Livez Notice of Change to PDS
 

 

Firstmac High Livez
Letter to all members
March 2020
 

 

Firstmac High Livez
Letter to all members
April 2020
 


 
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*Total return for the 9 years to 31 May 2020 and 5.67% 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 of $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.

High Livez is issued by Perpetual Trust Services Limited ("Perpetual") ACN 000 142 049 AFSL 236648 as the Responsible Entity of the Trust. The Investment Manager is Firstmac Limited ("Firstmac") ACN 094 145 963 AFSL 290600. Firstmac High Livez and the Product Disclosure Statement (PDS) is available at www.firstmac.com.au or by contacting Firstmac on 13 12 20. The information in this document is general information only and does not take into account any person's situation, financial objectives or needs. You should read the PDS in its entirety before making any decision to invest. Perpetual and Firstmac strongly recommend you obtain independent professional financial advice on the risks and suitability of this product. The value of your investment in High Livez could go down as well as up. Past performance is not a reliable indicator of future performance. Restrictions may apply to the amount and timing of withdrawal requests - refer to the PDS for full details.