Sydney, 21st October 2024

Foresight Analytics & Ratings has recently completed a ratings assessment of four Coolabah managed investment funds – the Smarter Money Long-Short Credit Fund (CSMLSCF), the Smarter Money Higher Income Fund (CSMHIF), the Smarter Money Fund (SMF)and the Active Composite Bond Fund (Hedge Fund) (CACBF). All four funds have been reassigned a SUPERIOR investment rating, reflecting Foresight Analytics’ highest level of confidence that the funds are likely to deliver a risk-adjusted return in line with its investment objectives.

The Foresight Product Complexity Indicator (PCI), which considers the complexity of an investment product based on 10 factors, was assigned as RELATIVELY SIMPLE for both the Smarter Money Higher Income Fund and the Smarter Money Fund. The strategies may include the use of very liquid derivatives such as index futures.

The Smarter Money Long-Short Credit Fund and the Active Composite Bond Fund (Hedge Fund) were assigned MORE COMPLEX PCI, reflecting the fact that these funds generate returns through a variety of non-standard strategies. These may 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.

All funds rated by Foresight Analytics & Ratings are managed by Australia-based Coolabah Capital Investments Pty Ltd, an active credit alpha manager responsible for managing numerous institutional mandates. The firm is 65% owned by its investment team and 35% 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 Sydney and Melbourne-based offices. The manager intends to continue expanding overseas and believes that its overall FUM capacity across all the strategies is between $15BN to $20BN. Earlier this year, Coolabah opens its office in Miami to support its trading and distribution activities for the North American region.

The CSMLSCF is an absolute return, fixed-income strategy. The investment manager aims to generate returns by taking a long or short position in mispriced fixed-income securities. Since its inception, the manager has made limited use of shorting, relying on leveraging the investment strategy implemented in the Smarter Money High Income Fund. 

The CSMHIF is an actively managed, short-term, fixed-interest investment solution that targets returns of 1.5%-3.0% p.a. above the RBA cash rate, over a rolling 12-month period. It is an enhanced cash product designed to deliver returns in excess of major bank term deposits with a similar liquidity profile.

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.

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.

Foresight analyst Shruti Ghosh commented on the SMF, saying that ‘Typically, the Fund has a very low interest-rate risk (target duration of < 3 months), a weighted average portfolio MSCI ESG rating of ‘AA’, credit ratings of A+ and high levels of liquidity.’ Collectively, these attributes help the firm deliver consistent defensive return stream that’s dominated by coupon income and lower volatility.

‘Consistent with all CCI fixed-income strategies, the portfolio is managed based on a combination of top-down and bottom-up quantitative, fundamental and technical analysis, enabling the manager to generate differentiated market insights, adapt to market conditions and position the portfolio accordingly to generate idiosyncratic alpha while minimising beta (systematic market risk).

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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 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. 

Media Contact – Foresight Analytics

Shruti Ghosh, Analyst 

Suite 208, 33 Lexington Drive, Bella Vista, 2153, NSW  

Telephone: 02 8883 1369

Email: shruti@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. As a niche investment ratings house, Foresight Analytics & Ratings focuses on complex alternative investments, including domestic and international alternative credit. 

For more information on our capabilities, please visit our website on www.foresight-analytics.com and social media platforms via LinkedIn, Facebook or Twitter and streaming channels YouTube and Podcast. You can also email us on customersuccess@foresight-analytics.com.