Sydney, 31 August – Foresight Analytics assigns “SUPERIOR” Investment Rating to two Coolabah Capital investment funds
Foresight Analytics & Ratings has recently completed a ratings assessment of two Coolabah Capital’s investment funds –the Coolabah Active Composite Bond Fund (CACBF) and the Coolabah Long Short Opportunities Fund (CLSOF). Both fund ratings have been assigned as SUPERIOR, reflecting Foresight Analytics’ highest level of confidence that the funds will deliver a risk-adjusted return in line with its investment objectives.
The Foresight Product Complexity Indicator (PCI) for both CACBF and CLSOF is MORE COMPLEX, indicating that the Fund generates returns through a variety of non-standard strategies. These strategies include the use of leverage, the ability to go both long and short, investment in sub-investment grade securities and the use of over-the-counter credit derivatives.
The CACBF and CLSOF are managed by Australia-based Coolabah Capital Investments Pty Ltd, an active credit alpha manager responsible for managing numerous institutional mandates. The firm is 75% owned by its investment team and 25% owned by the Pinnacle Investment Management Group Limited (ASX: PNI), an Australia-based multi-affiliate investment firm.
In 2020, Coolabah Capital opened a London office, in addition to 2 Sydney offices and a Melbourne office. The manager intends to continue expanding overseas and believes that its overall AUM capacity across all the strategies is between $15BN to $20BN. Pinnacle, which has offices in London and New York, is leading CCI’s overseas expansion and is exploring the best structures for offering the manager’s capabilities in overseas markets.
The CACBF is an active, fixed-income strategy focused on mispricing in the government and corporate bond markets, with the aim of delivering superior risk-adjusted returns over the Bloomberg AusBond Composite 0+ Yr Index, after management costs.
The CLSOF is an absolute-return, fixed-income strategy. The investment manager uses a strategy focused on exploiting long and short mispricing’s in credit and bank equity markets. The Fund invests primarily in debt securities, hybrids and derivatives.
Foresight Analytics’ analyst Maggie Callinan commented on the CACBF, saying that ‘CCI has recorded negative excess yield in the year ending July 2022, with recovery only taking place over the month of July. The performance reflects the global shifts in inflation and asset pricing over the period, with major changes in credit spreads and interest rates. While CCI correctly predicted much of the asset pricing shifts and held close to record-low exposures to credit spreads and interest rate risk, the portfolio has been impacted.’
She also commented on the CLSOF, adding that ‘‘The market turmoil caused by the recent inflation-driven interest rate spikes has affected this portfolio, causing a return of -1.78% for the year to July 2022. Investors should be prepared for a relatively volatile pattern of returns and a potentially extended time horizon for the strategy to achieve its return objective.’
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About Foresight Analytics’ Investment Due Diligence Rating (IDD Rating)
The objective of Foresight Analytics’ Investment Due Diligence Rating (IDD Rating) is to identify the best funds and opportunities for future investment. We assess the fund’s historical risk-adjusted performance – compared to its peers – to form a holistic view of the manager’s ability to deliver future returns. The IDD rating indicates the quality of the investment option within the context of a diversified portfolio and full investment cycle.
Foresight’s analysts use a 5-point scale to determine how the fund will perform against a range of risk factors.
- SUPERIOR indicates the highest level of confidence that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is highly suitable for inclusion on APLs.
- VERY STRONG indicates a very strong conviction that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- STRONG indicates a strong likelihood that the fund can deliver a risk-adjusted return in line with its investment objectives and that it is suitable for inclusion on most APLs.
- COMPETENT indicates the fund may deliver a risk-adjusted return in line with its relevant benchmark and that it may be suitable for APLs.
- WEAK indicates the fund is unlikely to deliver a risk-adjusted return in line with its investment objective and that it is not suitable for most APLs.
A ‘Hold’ designation is applied to a fund’s rating if a material change impacts the fund manager, and we need to review the rating.
A ‘Sell’ designation indicates the Foresight Investment Ratings Committee considers risk factors to be elevated enough that maintaining an investment in the fund as part of their diversified portfolio is questionable.
Foresight Complexity Indicator
A Foresight Complexity Indicator (FCI) highlights the complexity of an investment product based on a range of indicators. These typically include its terms and conditions, performance-based fees, liquidity structure, financial leverage, use of derivatives, rare and niche asset class/opportunity set, currency exposure and the level of transparency offered for investors. Foresight believes these factors can disproportionately affect risk-adjusted return outcomes for investors even if a manager is very skilled. Investors can use FCI as a guide to portfolio position sizing within a diversified portfolio context.
The full research report is available on the Foresight 360 Digital platform. The platform can be accessed via www.foresightanalytics.com.
About Foresight Analytics
Foresight Analytics, an independent Sydney based firm, provides investment diligence, data analytics, and advisory solutions to leading investment management companies, superannuation funds and wealth groups across the Asia Pacific. Foresight’s innovative, evidence-based approach blends both human and forensic insights to provide a range of analytical, predictive and market intelligence solutions to investors. Foresight Analytics was founded in 2015 by Jay Kumar, a former executive of Morningstar, Optimix Investment Management, ANZ Wealth & Private Bank and the Reserve Bank of Fiji.
Foresight’s fiduciary solutions include Diligence Services (Investment, Operational, ESG & Risk Diligence), Data Analytics and Asset Consulting. Foresight’s fund strategy solutions include Data Analytics for asset managers, Fund Strategy Benchmarking Solutions and Strategic Research.