Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
Wholesale market is the prime target for fixed-income SMAs
Fixed income investment provider Income Asset Management (IAM) will launch fixed-income separately managed accounts (SMAs) offering direct access to issuances next month.
There will be 10 to 15 issuances in the managed accounts with a minimum of five. The issuances will be a mix of investment-grade corporate bonds and syndicated loans.
The SMAs will have a minimum investment of $250,000 and are targeted at private clients, SMSF investors and their advisers. The offering is also suitable to fill the gap that will be left by ASX-listed hybrids as they are phased out by 2032.
“The access to syndicated loans is the real differentiator here. Syndicated loans are a superior product to recent listed private credit offerings because often these funds invest in property, adding concentration not diversification,” says Jenna Hayes (pictured), head of sales capital markets at IAM.
“The corporate syndicated loan market is a truly professional market, developed by banks and therefore very lender-friendly. Investors that allocate capital to this part of the debt market are supported by an army of analysts and lawyers and are subject to litany of governance policies before committing to a transaction.”
The accounts will be structured so that each SMA investor’s portfolio will directly own the asset. The standard custodian will be Perpetual, with trustee services provided by Trustees Australia.
IAM bond investments are available on Netwealth (where retail investors can access 350 bonds in parcels of $50,000) and HUB24 platforms. Investors who use one of these financial platforms can continue to do so and the SMA will face that platform for settlement.
James Simpson, a founding member of IAM’s second largest shareholder, Platinum Asset Management, is helping IAM construct the managed accounts. The SMAs will be managed by IAM executive director of credit strategy and portfolio management, Matthew Macreadie.
IAM is working on the risk allocation of the corporate bonds and loans that will make up the SMAs with Simpson.
“He’s suggesting 60 per cent investment-grade and 40 per cent in higher-yielding syndicated loans,” says John Lechte, IAM chief executive officer.
But he says they are also considering SMAs that offer just the higher-yielding issuances and the investment-grade, along with a combination of both.
“We’re not at this point looking at offering something that’s going to be targeting 15 per cent [yield]. So high-yield will be between seven per cent and 10 per cent and investment-grade will be between five per cent and seven per cent,” he says.
A benefit of holding corporate credit issuances directly, as opposed to via a managed fund, is that as the ultimate end-investor you get to control when you buy and sell the asset.
An investor will nearly always get their money back if they hold an institutional-grade corporate bond or loan to maturity, along with the coupon payments received along the way. That is not necessarily the case in a managed fund, where the fund manager decides if, and when, they will sell a bond.
For example, if you invested $100,000 in a 10-year corporate investment-grade bond with a coupon of seven per cent, you would make $70,000 in coupon payments over the life of the bond if you held it to maturity. You would also receive your initial investment back.
