Press Release – Foresight Analytics Upgrades Coolabah Floating-Rate High Yield Fund Rating to SUPERIOR.

Sydney, 8th May 2024 

Foresight Analytics & Ratings has recently completed a ratings assessment of the Coolabah Floating-Rate High Yield Fund.

The Analyst Rating for the strategy has been upgraded to SUPERIOR from VERY STRONG rating issued in May 2023. A SUPERIOR rating indicates the highest level of conviction that the Fund can deliver risk-adjusted returns in line with its investment objectives. The Fund is particularly well structured, applying leverage (typically circa 300%) to a portfolio of Australian bank senior and subordinated floating-rate notes (FRNs). The Australian bank FRN market has historically exhibited exceptional returns per unit of risk, has minimal default risk, and is highly liquid. In short, the underlying portfolio is well suited to be geared to enhance returns. Given current elevated coupon rates and the application of leverage, the Fund has generated attractive coupon-based returns since inception.

In addition to coupon returns, the Fund can generate returns from two additional sources. Specifically, Coolabah is a high turnover manager, has the ability to generate incremental returns from buying discounted primary issuance FRNs and subsequently selling in the secondary market. Secondly, Coolabah team have built strong tools and signals to generate returns from credit spread volatility on both senior and subordinated FRNs.

Coolabah Capital Investments Pty. Ltd. is 65% employee owned and 35% owned by the Pinnacle Investment Management Group Ltd. (ASX: PNI), an Australia-based multi-affiliate investment firm. Coolabah Capital Investments (Retail) Pty. Ltd. (CCIR) is a wholly-owned subsidiary of CCI and was established to offer investors fixed-income products with a low volatility profile.

CCI was established in 2011 and launched its first fund in February 2012. It has continued to grow strongly in all facets. It currently manages 15 public funds and 21 custom portfolios, with a combined FUM of approximately $10.3BN (as at March 2024). This includes the fastest growing ETMF in Australia, Betashare’s Active Australian Hybrids Fund (ASX: HBRD), which has over $2.1BN in FUM. CCI is a fixed-income relative-value house, as opposed to a credit house, and has a singular focus on high grade investment grade instruments. The Smarter Money Fund is an actively managed, low-duration, enhanced-cash investment solution that invests in Australian investment-grade bonds (all floating-rate securities). The Fund targets returns of 1.0% p.a. to 2.0% p.a. (net of fees) in excess of the RBA cash rate, over a rolling 12-month period.

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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 Analytics 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 riskadjusted 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. 

Picture-1 Press Release | Foresight Analytics Upgrades Coolabah Floating-Rate High Yield Fund Rating to SUPERIOR.

 

Media Contact – Foresight Analytics

Jay Kumar 

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Telephone: 0408266713

Email: jay@foresight-analytics.com

Web: www.foresight-analytics.com

About Foresight Analytics 

Foresight Analytics, an independent Sydney- based firm, provides investment ratings, data analytics, assurance 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 into the analyses of economies, markets, themes, investments products and portfolios. 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 Analytics & Ratings platform provides investment and operational due diligence ratings on both public and private market strategies. Foresight has built its diligence niche in complex alternative assets, including domestic and international private credit investments.

For more information on our capabilities, please visit our website on www.foresight-analytics.com and social media platforms via LinkedIn, Facebook or Twitter.

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