Doing well and doing good - not mutually exclusive

How scientific logic and ESG principals are being applied to deliver high performing, low volatility outcomes for savvy investors.

“The benchmark for the fund is the RBA cash rate plus 3%, with no performance fees. If we do well that’s great – that’s what we want to do,” Dr Vincent Chin, Clime head of income strategies and ESG, says.

“In the total return, we aim for two-thirds income distribution throughout the year, quarterly, and one-third growth. Over a cycle of five years or so, assuming a total return of 6%, we hope to distribute 4% in income and 2% in capital growth.

“The fund is designed for an audience that is probably looking at transitioning into retirement, and those who have just retired. We are all living much longer, so you need some capital growth when you retire as well as income.”

CAIF benefits from the experience of Dr Chin, who’s 22 years in investment are complemented by an esteemed background in science.

This drives an approach to ethical investing – the fund holds just one stock with fossil fuel exposure –and a methodical decision-making strategy.

“Applying a rational, logical mind, and approach to investment really helps, because the market can sometimes behave irrationally in the short term,” Dr Chin says.

“I prefer to observe. Pattern recognition and trends are also very important to me, and they guide the decisions we make for the fund.”

The results would suggest the approach has worked for CAIF, which is a strong performer against its peers.*

Since inception in July 2015 the fund has achieved a total return of 53.26%, with a per annum return of 5.79% while maintaining relative price stability against the broader market.

The fund is balanced around 40% equity and 60% fixed income including cash, a scale that helps it achieve its performance goals.

Esg A Way To Give Back

Dr Chin notes that when people reach a certain stage of life, they start to look for ways to give back. This plays in well with the underlying ESG themes of the CAIF.

“I think as people grow older, they become more conscious of doing things for the good of society,” he says.

Key Points

◾ Running yield of 5% (including franking).

◾ Low volatility.

◾ Quarterly income distributions.

Highlights

■ A multi-asset class portfolio that invests in high-quality income-generating assets.

■ Provides exposure to higheryielding securities in both listed and over-the-counter markets.

■ Aims to achieve a total return of 3% p.a. (after fees) over the RBA cash rate - whilst maintaining relative price stability.

■ The fund is managed to a risk of one-third of the volatility of the ASX200 by diversifying across shares and income securities.

■ Emphasis on quality, cash generation, low financial leverage and high predictability of income - including a focus on ESG considerations.

Discover More

Key Points

◾ Australian-based private credit asset manager

◾ Providing growth loans to middle market businesses

◾ Offers wholesale investors access to this asset class

Epsilon Direct Lending is an Australian private markets investment manager focused on lending to middle-sized companies, having identified that this section of the private credit market offers relatively better returns compared to other private credit strategies, according to Mick Wright-Smith, founding partner of Epsilon.

Direct lending to middle market companies has emerged in Australia as traditional bank lenders have reduced lending activities to these companies, due to regulatory, capital and cost pressures. Epsilon has entered the space to meet corporate borrowers’ demands for loans and says the returns are attractive.

“We like mid-market corporate lending because the market is still dominated by the Big Four banks and the availability of capital is limited. So, from a lender’s perspective, there is an opportunity to access loans which offer good relative value, that is, loans with