The iPartners Bond Income Fund (bring back the BIF) has reached 3 months of track record and we have outperformed our target. We expect to be at or above our target returns of RBA Cash +3-4% over a 2-3 year investment horizon even though we have already had those early wins.

Opening up a fund that doesn’t really look like anyone else’s was initiated by investor inquiries about bond market accessibility. We opted for a fund-based approach over direct bonds. This decision was influenced by the highly commoditised nature of the direct bond market where, unlike private markets, no one has a significant competitive edge.

We looked at how disappointing returns from fixed income had been as the inflation genie came out of the bottle in 2022. We saw that exposure to fixed rates added unwanted volatility to what was intended to be a defensive asset class. We selected a portfolio parameter set that allowed us to deliver superior risk adjusted returns from a neglected segment of the credit markets. We did all that because we are pretty sure it is the right thing for our investors.

Our primary advantage is our network, which facilitates access to primary market flows. The most sought-after bonds were aggressively pursued in the primary market by fund managers, making them largely inaccessible to direct investors.

The fund approach allowed us to leverage our influence with issuers and banks, achieving better outcomes in these dynamic markets. Conversely, less popular and longer-term assets, which were more accessible to direct investors, often had active secondary market trading but came with substantial costs and wide bid/offer spreads. The large minimum investment amounts in these markets could force investors to concentrate their investments, increasing risk and cost.

Directly managing a bond portfolio also presents challenges. Frequent portfolio adjustments in response to changing market conditions could be expensive. While acquiring new bonds with favourable characteristics seemed beneficial, the associated costs could diminish the potential returns. In the BIF we can plan for amortisations and maturities and using the wide iPartners capacity are able to build the portfolio for consistency and little if any latency.

Our non-transactional fee structure removes any incentive to engage in excessive trading. We have flat fees so when we exceed our targets the beneficiaries are our investors. We are committed to delivering this consistent income with very low-price movements by selecting the right assets that will achieve our investors’ expectations.

To find out more email sales@ipartners.com.au or register here.