Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
Credit the key to income as rates increase
Leading global fixed interest and credit investment manager, Bentham Asset Management, celebrates 18 years of income as it continues to attract investors to its Bentham Global Income Fund, which focuses on capital preservation and income.
Bentham Principal, CIO and portfolio manager, Richard Quin, has been with the firm for 18 years since he launched the fund due to “a lack of institutional-quality high-yielding credit opportunities” in the Australian marketplace. Quin found investment yields in global markets were a lot higher, and gave Australian investors income diversity.
With an active style of investing, the Bentham Global Income Fund focuses primarily on global credit markets in securities across the capital structure, including senior secured and unsecured debt, subordinated or hybrid securities, loans, structured credit and asset-based securities. This makes the fund suitable for income-seeking investors looking for something better than the RBA cash rate, with half the volatility of equity markets.
The fund is rated ‘Highly Recommended’ by Lonsec Research. The research firm noted, “the Bentham team, led by principal and CIO Richard Quin, is highly experienced in its specialist skill set of actively managing diversified credit portfolios. Adding depth to Bentham’s resources is a long-standing relationship with Credit Suisse Credit Investment Group, a global syndicated loan and high yield credit manager.”
The fund has a stellar record for delivering a consistent distribution over its 18 years. In the last 12 months, the fund returned a total return (after fees) of 8.5 per cent a year. Over the past ten years it has returned an average of 6.55 per cent a year (after fees) and paid an average income distribution of 5.62 per cent a year. It has outperformed its respective benchmark during a time when bond markets have benefited from capital gains as yields have fallen.
Quin says, “Going forward, we don’t think that traditional fixed income will provide investors with enough income. We think investors will increasingly look to credit markets to generate reliable income. Interestingly, global credit spreads are now wider in some sectors relative to when the fund was established. For example, US syndicated loans spreads have increased by 40bps to 440bps, and global capital security spreads have increased by 50bps to 140bps. These are two areas of the market we like at present.”
Credit markets look attractive at the moment given the potential for rates to rise, which should benefit credit assets. In a low-interest-rate environment, credit spreads remain attractive because they provide additional yield above cash rates and bond yields.
Quin concludes, “The fund is highly diversified, investing in at least 600 securities. Our exposure to US securities, and therefore US economic growth, provides an opportunity for investors looking to diversify their credit exposure away from the Australian market.”
