Boutique fund manager Affluence has added an income-focused fund to its existing suite of products, targeting returns of 3%+ above the RBA cash rate from a wide range of fixed-income investments.
The Affluence Income Trust is a fixed income fund with an exceptionally wide investment mandate. Affluence CEO Daryl Wilson said while the Fund was set up to take advantage of the abundance of opportunities in fixed income right now, the flexible investment mandate is also a vital feature.
“There’s nothing like this out there for retail investors”, Mr Wilson said. “We have the flexibility to invest across the fixed income spectrum and capture extra return from buying at discounts in times of volatility. We think we can deliver attractive returns over the cycle with low risk.”
The Affluence Income Trust invests predominantly through wholesale funds, providing access to a wide range of underlying managers, sub-sectors and investment strategies. “Retail investors currently have limited high quality options to choose from in the fixed income sector, outside of low yielding investment grade bonds”, Mr Wilson said. “Through our Fund, investors can access a wide range of institutional quality wholesale managers, specialising in different sub-sectors. This provides many advantages, including exceptional diversification and reasonable liquidity. ”
Currently, the Fund is overweight private credit, where Affluence considers the risk-adjusted returns to be compelling. The Fund has minimal exposure to market or duration risk. Mr Wilson explained that this is very deliberate. “Duration is a lottery right now, as we saw in 2022”, he said. “Also, publicly traded credit spreads have tightened right up, so there is no need to be there to any meaningful degree when the risk/reward equation is not favourable.”
Mr Wilson also stressed the value-add that Affluence can bring through their experience in discount capture across various sectors. Affluence currently has active discount capture strategies operating in REITs and LICs. After any market disruption, fixed income targets could include ASX listed debt LITs, publicly traded credit, distressed debt funds, convertibles and actively managed high-yield funds. “This arbitrage is a big opportunity to add value. We think we can add another 1-2% to returns through the cycle by harvesting embedded discounts following market corrections. The fixed income portion of our Affluence Investment Fund portfolio returned over 10% in 2023, including about 2% from harvesting discounts in debt LITs bought during the market correction in 2022.”
The Affluence Income Trust commenced in mid 2023 with internal capital and was recently opened to investors for the first time. It currently pays monthly income at a rate of 7.5% per annum.
The Fund complements the other funds in the Affluence product range. They include the all-weather Affluence Investment Fund and highly specialised strategies investing in LICs and small cap value, where Affluence believes there are structural advantages that allow talented investment managers to outperform.
ENDS
Key Facts:
Affluence has added an unconstrained, highly diversified fixed-income fund to its suite of products.
The flexible investment mandate enables the fund to take advantage of changing market conditions in fixed income, a feature that is very rare in this sector.
The fund invests primarily through wholesale funds, providing retail investors with access to high quality underlying managers they could not otherwise access.
Affluence is finding very attractive opportunities right now in private credit, where compelling returns are available with relatively low risk.
In times of market stress, Affluence has the potential to add significant value through discount capture, buying listed or publicly traded debt at discounts to their NAV or underlying value. This is a strategy Affluence has successfully executed in several other asset classes, including REITs and LICs.
The Fund pays monthly income and targets returns of 3% above the RBA cash rate. The current income rate is 7.5%.
About us:
Affluence Income Trust Fund page: https://affluencefunds.com.au/income-trust/
Latest Fund Report: https://affluencefunds.com.au/wp-content/uploads/2024/02/AIT-Report-January-2024-Final.pdf
Contact details:
Daryl Wilson, CEO/Portfolio Manager
Affluence Funds Management
P: 0402 046 883
