The Fund returned 0.58% over the month of February, delivered 1.99% for the previous three months and 8.99% over the past 12 months. The Net Asset Value (NAV) of the Fund, as at 28 February 2015, was $57.12m 2 and the redemption price was 1.363240 3.
February saw the continuation of the risk-on trade. Within the fixed income credit markets all assets have experienced a solid tightening over the last couple of years but naturally some have tightened more than others. For instance, the European High Yield iTraxx index, which represents the credit risk of 75 sub-investment grade European corporates, finished the month at 262 basis points (bps). This is significantly tighter than where it was in 2011 at 800bps and is close to its nadir, reached in 2007 just before the lead up to the global financial crisis (GFC).
Australian residential mortgage backed securities (RMBS), on the other hand, have also tightened in recent times, but they still remain relatively cheap. BBB rated RMBS are now trading around 300 bps. They were as wide as 500 bps in 2011 and as tight as 20 bps in 2007. In comparison to where the European High Yield iTraxx index trades, they represent excellent relative value which is one reason the Fund still has a significant allocation to RMBS.

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