An entity of the Perennial Group, Daintree’s new hybrid fund first entered the market on 1 March last year, but has not officially been made available to all investors in the Australian market.
The fund invests in a diversified portfolio of 25-125 hybrid bank securities – the aim of the fund is to give investors a return of 3.5-4.5 per cent per annum, above the cash rate, with quarterly income distributions.
According to Brad Dunn, the portfolio manager for the fund at Daintree, investors are looking for investments that provide reliable and consistent returns.
“Hybrids offer some of the best yield in the fixed income market for a near-investment grade credit rating, with lower risk than investing in equities markets,” he said.
Despite these benefits, Mr Dunn highlighted that there had been a lack of such products in the Australian market in recent years.
The Daintree Hybrid Opportunities Fund invests in the hybrid securities of global banks including Bank of America, Credit Suisse, Lloyds Bank and ING Group.
Mr Dunn explained that this international approach has opened up more opportunities for investors to have exposure to large, quality issuers.
“Over the past decade banks have strengthened their balance sheets as a result of tougher capital rules and they have a high average credit rating,” he said.
“We believe banks are also well positioned to benefit from rebounding economies as the world emerges from the COVID-19 pandemic.”
Mr Dunn also highlighted how active management, alongside this global diversification, was being used by the fund to drive outperformance against the Australian bank hybrid index.
Between the fund’s launch to wholesale investors and 31 August 2021, the fund has returned 12.58 per cent after fees. In the last 12 months, it has returned 6.49 per cent (net of fees).
The fund will be available to retail investors in a single unit structure – units can be applied for directly, either via an investing platform or through the ASX, using a broker.
“Our goal was to allow investors to choose their preferred method of access, with the option of having the real-time liquidity that comes with investing on an exchange,” said Mr Dunn.
“On-market funds are particularly popular with retail investors as they typically do not have a minimum investment amount, with the exception of the minimums that are imposed by brokers.”
Daintree currently manages approximately $700 million for investors.
