High Livez Investment Performance

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Fund performance

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Data Table - High Livez Performance

Annual performance (% per annum)	Distribution Return	Growth Return	Total Return*
Current Month Annualised	6.76%	0.17%	6.93%
1 year	6.03%	1.49%	7.52%
3 year	3.89%	0.13%	4.02%
5 year	3.84%	0.02%	3.86%
10 year	4.32%	0.01%	4.33%
Since inception#	4.87%	0.38%	5.25%

Past performance is not indicative of future performance

# inception date was 29 March 2011

Understanding the data

High Livez Fund investments are floating rate, which receive a fixed margin above a base rate. This means that in the event of inflation and rising interest rates, the Fund’s distribution returns are likely to rise, whilst if interest rates fall, distributions are also likely to fall. The correlation between the Fund’s distribution rate and the RBA’s official cash rate is illustrated in the above graph. The investments held by the High Livez Fund are loans, which means that in the event a borrower defaults, the High Livez Fund (and accordingly its investors) will not benefit from returns from that loan. All loans are subject to borrower default risk, and in a higher rate environment, this risk may be higher. An investment in the High Livez Fund is at risk, and is a different asset class to cash which is displayed by the RBA Cash Rate. Accordingly, an investment in the High Livez Fund is of a higher risk than an investment in cash. By displaying this graph, it is intended to show how the High Livez Fund’s returns may be affected by changes in the RBA Cash Rate, and it is not intended to compare an investment in the High Livez Fund to a cash holding.

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Performance Summary

Fund Objective

The Trust aims to provide stable monthly income returns from a diversified portfolio of Asset-Backed Securities supplemented by a small allocation towards Short Term Money Market Securities.

The Trust will invest in Asset-Backed Securities and Short Term Money Market Securities which are normally only available to professional and institutional investors.

Fund performance to 31 October 2023

The distribution return for the month of October was 6.76% per annum.

The Unit Price has now climbed steadily since reaching a recent low of 1.0329 during July 2022 to 1.0488 this month. We note that even during this period of fairly volatile global market conditions, the Unit price volatility has remained low within a very narrow band.

Since inception in March 2011, the fund has experienced low Unit Price volatility of an annualised 1%. This means that the movement in Unit Price is quite narrow, tracking closely to the mean. This is consistent with a low risk managed fund.

The RBA has now lifted the cash rate target twelve times for a total of 4.00%. This has resulted in a corresponding increase in the one month bank bill rate off which our fund investments reset above. The investments of the fund are all floating rate Notes which reset monthly. Hence, a rising cash rate will result in higher coupon receipts, increasing the distribution return of the fund. This means that increased collections, and therefore distributions, are anticipated in the future, continuing the trend illustrated in the below chart.

The RBA Cash rate and BBSW1m are 99.4% correlated over a ten year period. The RBA cash rate is widely understood and provides a useful explanation of fund returns, i.e. demonstrating that the fund returns are heavily influenced by changes in the RBA cash rate, as of course BBSW1m is highly correlated with the RBA cash rate.

Underlying asset quality remains strong, with low delinquencies across the underlying residential mortgages. We are pleased with our portfolio resilience however we do anticipate some increase in delinquencies associated with increasing mortgage rates. We expect all investments to be comfortably within tolerance over the months ahead.

The Total Return for the past 10 years was 4.33% per annum.

It is recommended that unitholders invest with a timeframe of 3-5 years. Over the past year three years, the Total Return was 4.02% per year, and over the past five years was 3.86% per annum.

The weighted average life of underlying investment holdings was 1.5 years as at the end of October 2023.

The High Livez Fund is not capital guaranteed.

Australian Economic Update

Australian economic indicators released in October and early November were again mixed strength with Q3 CPI inflation coming in higher-than-expected at 1.2% q-o-q, 5.4% y-o-y. September retail sales rose much more than expected, by 0.9% m-o-m and real Q3 retail sales were up 0.2% q-o-q, the first quarterly rise in a year. Housing indicators showed still some upward price pressure, with the value of home loans up 0.6% m-o-m in September, but home building approvals down 4.6% m-o-m. Employment growth was soft in September with employment up only 6,700. A fall in the labour force participation rate to 66.7% from 67.0% in August saw the unemployment rate edge down one notch to 3.6%. The RBA at its October policy meeting left the cash rate unchanged for a fourth consecutive month at 4.10% but indicated that current or higher interest rates might be needed for some time to contain inflation. The higher than expected Q3 inflation result has led almost all economists to call a 25bps rate hike to 4.35% at the November policy meeting.

Australian Credit Markets

Markets experienced increased negative risk sentiment driven by the combination of elevated bond yields and geopolitical events (conflict in the Middle East). The Australian iTraxx was wider by 10 basis points to close at 97 basis points. Physical credit assets performed well and experienced little widening in spreads as investors absorbed the supply of primary issuance in both Senior and Tier 2. One of the drivers for the increased primary issuance is due to the relative attractiveness of the Australian Tier 2 pricing compared to offshore, with issuers preferring to undertake transactions domestically. Structured markets were busy with ten new transactions pricing across varying collateral types, most notably the A$2 billion CBA Medallion trade which is the first public Major Bank RMBS deal since NAB in June 2022. Investor demand continues to be strong for these deals with tranches being preplaced and or having note oversubscription across the capital stack.

Historical performance assumptions

*Total Return for the 10 years to 31 October 2023 and 5.25% since inception on 29 March 2011. The total return is the Fund’s consolidated performance over the period referenced. 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 website is prepared and issued by Firstmac Limited ACN 094 145 963 (Firstmac) the holder of Australian financial services licence (AFSL) number 290600 in respect of Firstmac High Livez ARSN 147 322 923 (Fund). Perpetual Trust Services Limited ACN 000 142 049, the holder of AFSL number 236648 is the responsible entity (RE) and the issuer of the units in the Fund (Units). A target market determination for the Fund is available at www.firstmac.com.au or by contacting Firstmac on 13 12 20. This website has been prepared without taking account of your objectives, financial situation or needs. Before investing in the Fund, you should consider whether an investment in the Fund is appropriate having regards to your objectives, financial situation and needs and obtain appropriate professional advice. Prior to making a decision about whether to acquire, hold or dispose of Units you should consider the product disclosure statement (PDS) for the Fund available at www.firstmac.com.au. Past performance is not a reliable indicator of future performance and may not be repeated. Restrictions may apply to the amount and timing of withdrawal requests – refer to the PDS for full details.