Bentham funds deliver strong performance, well-prepared for an easing cycle

Richard Quin

Bentham Asset Management, one of Australia’s leading specialist global fixed interest and credit investment manager, has reported strong performance across its multi sector  funds in the recent quarter, outpacing various benchmarks and achieving positive returns despite market volatility and easing global interest rate cycle.

Richard Quin, chief investment officer, highlighted the standout performance of global government bonds, which rallied by about 42 basis points, or close to 50 basis points on the year. Global bonds outperformed Australian bonds by almost 86 basis points on the quarter and half a percent over the year. Bonds also outperformed cash by around three and a quarter percent.

“Overall, it was a good quarter for bonds. Credit markets also performed well, with notable gains in bank contingent convertible (CoCo) bonds, high-yield, and emerging market assets. Equities, meanwhile, slightly underperformed bonds, marking a unique shift in market dynamics.

“All of Bentham’s funds saw positive returns this quarter, outperforming cash, fixed interest, and most credit markets,” Quin noted. “On a risk-adjusted basis, Bentham’s funds have delivered superior returns with lower volatility compared to equities, especially in emerging markets.”

“Looking closely at economic factors, in the US, inflation is currently trending lower, while supply chain pressures have normalised despite recent geopolitical volatility. Most central banks are cutting rates, except the RBA, which is lagging behind. There are substantial rate cuts priced in over the next year, with about five cuts expected in the US, seven in New Zealand and only two and a half in Australia. New Zealand is likely to feel the most pain, having experienced higher interest rates for the longest period,” he added.

“We maintain a positive long-term outlook for bonds with a reduced but strategic duration in a cycle of falling rates.”

The firm has slightly lowered its credit exposure, citing tight credit risk premiums and higher valuations. Bentham has shifted to holding semi-government bonds, offering low default risk.

Looking forward, Quin noted that Bentham is well-prepared for an easing cycle, strategically positioning its multi-sector portfolios for potential interest rate cuts and moderate inflation.

“We remain cautious about credit valuations and stand ready to deploy capital as opportunities arise.

“Global economic policies are beginning to ease, and we’re positioned to navigate this environment. With inflation contained, we believe holding duration is prudent, and we’re focused on managing risk while delivering strong returns for our investors.”