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ROADTEST
Hastings Yield Fund
Who runs the fund? Hastings Funds Management, a Melbourne-based specialist in infrastructure and yield investments, and since 2005 a Westpac subsidiary.
The basics: Invests in high yield securities including loans and hybrids. High yield means the payout is greater than in mainstream bonds, but with a greater credit risk too. It aims to beat the UBS Australian Bank Bill Index by 3% per year.
The process: Looks at senior, subordinated and mezzanine loans – these terms tell you in what order creditors get paid if a company runs into trouble. Subordinated ranks behind senior but pays better. Also looks at bonds and hybrids and can invest in structured products like collateralised debt obligations, though in practice it doesn’t seem to.
The bottom line: Good over the longer term: Morningstar says its 7.14% per year return over three years and 8.18% over five is among the best of all yield funds in Australia. 12.42% over the past 12 months is weaker than many peers, however.
Fees: 0.4% plus a 10% performance fee on returns above its benchmark, but retail investors will only be able to reach it through a platform, so add on the platform administration fee too. Alternatively a listed fund with similar holdings, Hastings High Yield Fund, can be bought and sold like any share.
Verdict: High yield is one of the buzzing areas of world capital markets, and Hastings has shown it can be successful in this complex area.
NEW FUND
Climate Advocacy Fund
What is it?
A new ethical fund which not only aims to deliver a decent return – similar to the overall share market – but to do so while improving corporate behaviour, performance and sustainability. It will do this by actively engaging with companies about environmental, social and governance issues related to climate change.
Is that a good investment?
In performance terms it doesn’t claim to be any more than an index fund and will use passive management to try to at least equal the S&P/ASX 200. It charges 1.1% a year (0.85% if you invest over US$50,000) which is more expensive than some ways of getting index exposure, but less than most actively managed funds. You’d really be buying it in the hope of effecting an environmental difference.
Well who’s doing the advocacy?
Australian Ethical, which has been running ethical managed funds and superannuation since 1986. Its Balanced Trust flagship fund, for example, has A$237.5 million under management.
If it’s an index fund how can it pick only ethical stocks?
Its portfolio will be built using an economic footprint weighting. But it differs from most ethical funds in that rather than selecting the best companies environmentally, it will use its clout as an investor to try to change practices at companies generally.
GIZMO
The iLuv iPhone iMM190 App Station
If you are an iPhone junkie you have probably already surrendered most of your daily functions to your gadget bar eating it. So you might as well add another: as well as using it for your email, address book, music, video, and even perhaps as a phone, why not make it your bedside alarm clock?
This so-called App station is a cross between a charger and a speaker. You attach your iPhone to it, add the alarm clock application from iTunes, and away you go: it turns into a big-display bedsides clock and you can program it to wake you up with your favourite iTunes songs, or with weather information, for example. It works equally well as a desktop speaker for an iPhone or iPod, and it charges the gadget while it plays. It can run on batteries so can be used outside too.
FUND WATCH
EQT SGH Absolute Return
The idea of an absolute return fund is to see a benchmark and plunge beneath it. Well, that’s not the theory, but a look at this fund’s returns might lead you to believe so, with comprehensive underperformance of the stock market over one, three and five years.
In fairness, it’s not meant to track stock market returns exactly: 75% of the portfolio goes into equities and 25% into absolute return strategies. This theoretically insulates investors during market declines, but it’s not showing up in the numbers.
