The Fund returned 0.74% over the month of January, delivered 2.03% for the previous three months and 8.97% over the past 12 months. The Net Asset Value (NAV) of the Fund, as at 31 January 2015, was $54.27m 2 and the redemption price was 1.3553363.
The Fund has little exposure to movements in interest rates because the majority of the assets within the Fund are floating rate notes (the interest rate duration of the Fund as at January 31st 2015 was 0.05 years). This helped the Fund avoid the sell-off experienced by fixed rate bonds during 2013, but the Reserve Bank of Australia’s move to cut the cash rate on February 2nd lowered the one month BBSW rate, which is the benchmark rate for most of the assets in the portfolio. This will marginally reduce the Fund’s returns in the near term.

The lower cash rate also means the yield on term deposits (TDs) continues to fall. TDs with the four major Australian banks are now around 3.2%. These rates have never been lower and look like falling further with the market expecting more cuts in the official cash rate and the TD spread over that cash rate tightening. The problem for domestic investors is that the real return on TDs (the nominal return adjusted for inflation) is now barely above 1%.

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