Realm Investment House

The December report is now available for the Realm Global High Income Fund AUD. Our global active credit strategy closed 2024 with a net of fee return of 1.07% for the month and 12.79% for the year. A solid outcome for a liquid investment grade portfolio with no leverage.   Key drivers of performance included: - A strategic overweight to global bank T1 capital – the sector strongly outperformed, recovering from the collapse of Credit Suisse in March 2023. - Enhanced yield and performance from global collateralised loan obligations (CLO), as well as, - Decent bouts of market volatility which provided numerous relative value trading opportunities - this saw the book turnover more than 3x for the year.   As we enter 2025 with credit spreads at historically expensive levels, the fund has de-risked but maintains a healthy yield of 7.05%. With ongoing uncertainty in global markets, we expect 2025 will continue to provide plenty of opportunities for the fund to actively trade and exploit global market dislocations to generate strong returns for our clients. Happy Investing in 2025!   For more information on the fund, head over to our website or reach out to the Distribution team.

The December report is now available for the Realm Global High Income Fund AUD. Our global active credit strategy closed 2024 with a net of fee return of 1.07% for the month and 12.79% for the year. A solid outcome for a liquid investment grade portfolio with no leverage.   Key drivers of performance included: - A strategic overweight to global bank T1 capital – the sector strongly outperformed, recovering from the collapse of Credit Suisse in March 2023. - Enhanced yield and performance from global collateralised loan obligations (CLO), as well as, - Decent bouts of market volatility which provided numerous relative value trading opportunities - this saw the book turnover more than 3x for the year.   As we enter 2025 with credit spreads at historically expensive levels, the fund has de-risked but maintains a healthy yield of 7.05%. With ongoing uncertainty in global markets, we expect 2025 will continue to provide plenty of opportunities for the fund to actively trade and exploit global market dislocations to generate strong returns for our clients. Happy Investing in 2025!   For more information on the fund, head over to our website or reach out to the Distribution team.

We’re delighted to report a very strong 12 months across all our funds.   As at 30th November 2024, the Realm Global High Income Fund AUD achieved a 1-year p.a. return of 14.07%, exceeding its benchmark by 9.72%. Over the year, the Fund achieved many milestones; earning a ‘Recommended’ rating from Zenith Investment Partners, and an ‘Investment Grade’ rating from Lonsec, and recently broke through $150m in FUM to close out the year. The High Income Fund, Short Term Income Fund, and Strategic Income Fund achieved 1-year p.a. returns of 11.06%, 7.12%, and 10.47% respectively. 2024 was indeed a year of growth at Realm, with our team welcoming 10 new faces across Melbourne and Sydney offices. But not just in size, our team has grown as Anthony C., Andrew Jones, CFA, Anthony Cormack, and Thomas Kapellos, CAIA CIMA® all earned new titles as Associate Portfolio Managers.   2024 saw us break through $7bn in FUM, with all three of the Realm High Income Fund, Short Term Income Fund, and Strategic Income Fund Enduring Units surpassing $2b in FUM over the year. We’d like to thank all our clients for their ongoing support.   Not only have we grown in size, but we’ve also grown in scope. Our Corporate and Bank Capital team have worked hard in expanding our coverage universe, with 71 new issuers entering our book across 9 countries. We’re also proud to announce that this year we have originated, structured, and funded our first private assets in North America and Europe - opening exciting new doors for growth and opportunity in the years ahead!   Our hard work didn’t go unnoticed, with Zenith Investment Partners awarding Realm the ‘Australian Fixed Interest Manager of the Year’. The Short Term Income Fund also earned an upgrade Highly Recommended rating from Lonsec. At an individual level, Anthony C. was recognised by The Asset as the Most Astute Investor for G3 Bonds.   Well done to the team on a fantastic 2024, looking forward to an even better 2025!   On behalf of the Realm team, we wish you a happy and safe new year.

We’re delighted to report a very strong 12 months across all our funds.   As at 30th November 2024, the Realm Global High Income Fund AUD achieved a 1-year p.a. return of 14.07%, exceeding its benchmark by 9.72%. Over the year, the Fund achieved many milestones; earning a ‘Recommended’ rating from Zenith Investment Partners, and an ‘Investment Grade’ rating from Lonsec, and recently broke through $150m in FUM to close out the year. The High Income Fund, Short Term Income Fund, and Strategic Income Fund achieved 1-year p.a. returns of 11.06%, 7.12%, and 10.47% respectively. 2024 was indeed a year of growth at Realm, with our team welcoming 10 new faces across Melbourne and Sydney offices. But not just in size, our team has grown as Anthony C., Andrew Jones, CFA, Anthony Cormack, and Thomas Kapellos, CAIA CIMA® all earned new titles as Associate Portfolio Managers.   2024 saw us break through $7bn in FUM, with all three of the Realm High Income Fund, Short Term Income Fund, and Strategic Income Fund Enduring Units surpassing $2b in FUM over the year. We’d like to thank all our clients for their ongoing support.   Not only have we grown in size, but we’ve also grown in scope. Our Corporate and Bank Capital team have worked hard in expanding our coverage universe, with 71 new issuers entering our book across 9 countries. We’re also proud to announce that this year we have originated, structured, and funded our first private assets in North America and Europe - opening exciting new doors for growth and opportunity in the years ahead!   Our hard work didn’t go unnoticed, with Zenith Investment Partners awarding Realm the ‘Australian Fixed Interest Manager of the Year’. The Short Term Income Fund also earned an upgrade Highly Recommended rating from Lonsec. At an individual level, Anthony C. was recognised by The Asset as the Most Astute Investor for G3 Bonds.   Well done to the team on a fantastic 2024, looking forward to an even better 2025!   On behalf of the Realm team, we wish you a happy and safe new year.

𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗖𝗿𝗲𝗱𝗶𝘁 𝗘𝗻𝘁𝗲𝗿𝘀 𝘁𝗵𝗲 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗖𝗟𝗢 𝗠𝗮𝗿𝗸𝗲𝘁!   Barings just priced the first Euro-denominated Private Credit CLO, a milestone for the European market. Unlike the 2019 Spanish Alhambra CLO, which struggled with SME loans and regulatory hurdles, Barings' deal stands out with a larger, diversified asset pool and attractive spreads compared to traditional BSL CLOs.   Rated by S&P and Fitch, this transaction showcases the potential for private corporate loans to be securitised, offering enhanced yield and risk diversification. A game-changer for European private credit!

𝗔𝗦𝗫 𝗧𝗶𝗲𝗿 𝟭 𝗵𝘆𝗯𝗿𝗶𝗱𝘀 𝗹𝗼𝗼𝗸 𝗰𝗵𝗲𝗮𝗽 𝗽𝗼𝘀𝘁 𝗔𝗣𝗥𝗔'𝘀 𝗽𝗿𝗼𝗽𝗼𝘀𝗮𝗹 𝘁𝗼 𝗽𝗵𝗮𝘀𝗲 𝗼𝘂𝘁 𝘁𝗵𝗲 $𝟰𝟯 𝗯𝗶𝗹𝗹𝗶𝗼𝗻 𝘀𝗲𝗰𝘁𝗼𝗿 We argue the ASX T1 market looks attractive for these THREE reasons: 𝟭. 𝗨𝗻𝗱𝗲𝗿𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗲𝗱 𝘃𝘀 𝘀𝗮𝗺𝗲 𝗿𝗶𝘀𝗸 𝗶𝗻 𝗼𝗳𝗳𝘀𝗵𝗼𝗿𝗲 𝗰𝘂𝗿𝗿𝗲𝗻𝗰𝗶𝗲𝘀 APRA's proposed changes to eliminate AT1's from the bank capital stack saw ASX T1 spreads initially rally ~30bps. However, comparing similar securities WBCPJ (ASX AT1) to Westpac's USD OTC AT1, we observe AUD spreads have underperformed as the USD equivalent has rallied ~90bps since the announcement. (Chart below). 𝟮. 𝗨𝗻𝗱𝗲𝗿𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗲𝗱 𝘃𝘀 𝗧𝟮'𝘀 Looking across the capital stack, ASX T1's are trading 1.6x the spread of Tier 2's, which has cheapened up from the 1.2x level in October. 𝟯. 𝗖𝗵𝗲𝗮𝗽 𝘃𝘀 𝗲𝘅-𝗮𝗻𝘁𝗲 The recent sell off sees the market wider despite APRA's proposal to remove T1's clearly a positive for calls/ grandfathering. While the changes aren't a certainty, we think there should still be some premium for ASX T1's given recent regulatory rhetoric and would consider the market oversold in this context. While offshore credit spreads have rallied to excruciatingly tight levels, Australian credit markets are again providing an opportunity for value. Source: Bloomberg

What do Sabrina Carpenter’s “Espresso” and BNK’s “Robusta 2024-1 Trust” have in common? Other than being aptly named after coffee, both are summer hits of 2024!   Australia’s securitisation market has reached a new high, breaking through $70 billion in issuance since the start of 2024, highlighted by the recent pricing of Robusta 2024-1.   This term deal sets the benchmark for specialist lending and regional banks.   Specialist lending has traditionally been served by non-bank lenders; however, a closer look at the borrower pool shows that the credit risk looks more like what you would find in prime borrowers, particularly self-employed individuals. This is underscored by the quality of the Robusta 2024-1 pool, featuring Weighted Average LVR of 60.5%, and excludes self-employed borrowers with less than two years of history, and borrowers who are credit-impaired or have discharged bankruptcies.   In 2024, demand for this collateral type has surged, with record-high coverage ratios and pricing that 𝗼𝘂𝘁𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝘀 prime/conforming deals. We saw this in the recent pricing of Think Tank Commercial 2024-3, regarded as one of the benchmarks for specialist lending, where average coverage across tranches was 3.5x, and mezzanine tranches priced at record tights.   Robusta 2024-1 also marks the first public Australian specialist lending by an Authorised Deposit-taking Institution (ADI). As BNK’s inaugural programme, it attracted a spread premium of up to 65bps on the sub-investment grade tranches. While the transaction offered strong relative value compared to current market spreads, the key question remains whether other ADIs will follow suit or if this will remain an isolated transaction.

We are excited to celebrate the first birthday of our Realm Global High Income Fund AUD!   Since its inception on 16 November 2023, the Fund has delivered a one-year return of 15.83% (net of fees). Our active global credit strategy uses no leverage and maintains a weighted investment grade credit rating (with sub-IG exposures capped at 25%).   We’re also proud to share that the Fund surpassed $100 million in FUM, one day before its birthday. A significant milestone in just one year.   The Fund was recently awarded a “Recommended” rating from Zenith Investment Partners and an “Investment Grade” rating from Lonsec, and is now available on most major Super & IDPS platforms.   A big congratulations to Co-Portfolio Managers Adrian Chow and Matthew Sleight, as well as the supporting Associate Portfolio Managers Andrew Jones, CFA, Anthony C., and Thomas Kapellos, CAIA CIMA® for all their hard work.   For more information about the fund, head over to https://lnkd.in/g8-MTXna, or contact our Distribution team.

𝐌𝐚𝐤𝐢𝐧𝐠 𝐀𝐦𝐞𝐫𝐢𝐜𝐚𝐧 (𝐁𝐨𝐧𝐝 𝐕𝐨𝐥𝐚𝐭𝐢𝐥𝐢𝐭𝐲) 𝐆𝐫𝐞𝐚𝐭 𝐀𝐠𝐚𝐢𝐧   The Trump re-election has certainly made its mark on the markets. The left panel of chart shows a notable risk-on move across various sub-sectors, from the day betting markets assigned a higher probability of a Trump win. This has been a staggering rally in a short period and is reminiscent of his election in 2016. However, US government bonds sold off as inflation expectations rose, and risk compensation also increased.   US 10-year bonds have fallen 3% since Oct 9 and this would have adversely affected any fixed income portfolios with meaningful interest rate duration exposure. The possibility of rising bond yields, driven by concerns over increased debt issuance, have become a key bearish catalyst among fund managers heading into 2025 post Trump re-election (chart right panel).   Whilst government bonds generally have low default risk (so far), their investment returns can be volatile and President-elect Trump’s agenda brings considerable risks. Even small interest rate duration exposures can dominate the performance of fixed income portfolios. As this recent period shows, relying on government bond duration in low-risk, high-liquidity funds can not only adversely affect returns but also heighten volatility.   This is why at Realm, we believe in managing lower risk portfolios through high quality short duration credit instruments with minimal interest rate duration exposure.

A big thank you to Kath Clapham, Alex Hairsine and the Aurizon Treasury Team for hosting Realm Investment House's Andrew Jones, CFA for its Townsville debt investor site tour last week. The insights provided by David Wright and members of Aurizon’s Bulk Business at its Stuart Depot and Townsville Port facilities were fantastic. It’s certainly an exciting time for the Bulk Business and Realm looks forward to ongoing engagement with the Aurizon Team.