The Fund employs an absolute return investment approach, aiming to outperform the RBA cash rate by a net margin of 1.5% p.a. to 2% p.a. over rolling three-year investment terms, while delivering investors a steady income stream and focusing on capital preservation.

Daintree was established in 2017 and actively manages approximately $380 million for investors.

The investment philosophy centres on the belief that markets are not fully efficient, with asset values, at times, driven by irrational influences. To navigate this, Daintree employs both a top-down and bottom up approach, focusing on absolute return orientation, mandate flexibility, and emphasis on coupon income.

Commenting on the Fund’s performance and track record, Lonsec said: “Over the three-year period to August 2020, the Trust’s return of 2.8% p.a. exceeded the outperformance target of 1.5%-2% and outperformed the Lonsec peer group. Pleasingly the returns were also generated at significantly lower volatility as measured by the standard deviation of returns than the Lonsec peer group.

“Lonsec believes the Trust, having recently achieved a three-year track record, has been true to label, acting in accordance with its investment philosophy which focuses on capital preservation.”

Daintree is co-founded and managed by Mark Mitchell, responsible for credit investments, and Justin Tyler, who specialises in interest rates and currency. Mitchell and Tyler are supported by a team of fixed income experts.

Commenting on the team, Lonsec said, “Mitchell and Tyler are well experienced with their respective specialist areas and complimentary in holistically managing the portfolio.  The investment team’s alignment of interest with investors is strong, driven by the 50% equity ownership by Mitchell and Tyler and co-investments by all the investment team members. Furthermore, the team is backed by Perennial Partners, an established entity in the domestic equities market, mitigating risk and driving business growth and opportunity.”

Daintree Co-Founder and Director, Mark Mitchell, said: “Fixed income markets have changed dramatically in recent times and investors can no longer afford to ‘set and forget’. The RBA has announced a record low interest rate of 0.10%, mirrored by central banks around the world, resulting in limited genuinely defensive income generation options available for fixed income investors. The multi-decade rally in government bond yields has likely come to an end so investors need other options for this portion of their portfolio. The days of owning simple long duration fixed income assets have likely come to an end.”

Justin Tyler, Daintree Co-Founder and Director, added: “Quality investment analysis, risk management, and diversification are crucial in fixed income, which is why we believe in an active approach aligned to investors goals and risk appetite. We also view ESG integration as integral to quality investment analysis and managing risk, which is why the team employs thorough research, screening out ten harmful, negative sectors.

“The Daintree team is excited to receive an upgrade to Recommended for our Core Fund, a testament to our true-to-label, specialist approach,” Mr Tyler said.

Daintree’s Core Income Fund also received a “Recommended” rating through Zenith Investment Partners, while its High Income Trust received an “Approved” rating by Zenith. Daintree was also named a Finalist in Zenith’s Rising Star Awards last month.

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The Fund employs an absolute return investment approach, aiming to outperform the RBA cash rate by a net margin of 1.5% p.a. to 2% p.a. over rolling three-year investment terms, while delivering investors a steady income stream and focusing on capital preservation.

Daintree was established in 2017 and actively manages approximately $300 million for investors.

The investment philosophy is centred on the belief that markets are not fully efficient, with asset values, at times, driven by irrational influences. To navigate this, Daintree employs both a top-down and bottom up approach, focusing on absolute return orientation, mandate flexibility, and emphasis on coupon income.

In its report Zenith commented, “Daintree has significantly improved its security selection process, combining a range of propriety quantitative models and technology that aids in the systematic aggregation of market-based data and third-party information.

“Daintree’s fair value approach provides a solid foundation upon which an issuer’s credit policy and spread margins can be assessed. Ultimately, Zenith considers this an efficient mechanism for narrowing the Fund’s investible universe and identifying mispriced opportunities,” Zenith said.

Daintree is co-founded and managed by Mark Mitchell, responsible for credit investments, and Justin Tyler, who specialises in interest rates and currency. Mitchell and Tyler are supported by a team of fixed income experts.

Commenting on the team, Zenith said, “Mitchell and Tyler have complimentary skills and contribute unique perspectives to the investment process. Furthermore, we believe the combination share a similar set of investment beliefs, which is evident in their collaborative approach to portfolio management.”

Daintree Co-Founder and Director, Mark Mitchell, said: “Fixed income markets have changed dramatically in recent times. Interest rates are at historic lows resulting in limited genuinely defensive income generation options available for fixed income investors. The multi-decade rally in government bond yields has likely come to an end so investors need other options for this portion of their portfolio. The days of just “set and forget” by owning simple long duration fixed income assets have likely come to an end.”

Justin Tyler, Daintree Co-Founder and Director, added: “Quality investment analysis, risk management, and diversification are crucial in fixed income, which is why we believe in an active approach aligned to investors goals and risk appetite. The Daintree team are excited to receive an upgrade to ‘Recommended’ for our Core Fund, a testament to the true-to-label, specialist approach of our team.”

Daintree’s High Income Trust also received an “Approved” rating in May this year through Zenith Investment Partners.

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Justin Tyler

Despite the nation having one of the highest savings rates in the world thanks to its compulsory superannuation system, a closer look at Australian retirement funds revealed they contained on average an almost 50% allocation to equities^[1], significantly higher than other developed nations such as the UK and Canada.

Daintree Capital Director Justin Tyler said the heavy weighting to growth assets was driven by Australians’ lack of familiarity with the bond market and their eagerness to take advantage of the nation’s generous franking credit regime, but raised additional volatility and sequencing risks for retirees in particular.

“Equities may be better understood by most investors as an asset class, but fixed income plays an equally important role in a portfolio – one of insurance. The fixed interest component of a portfolio smooths out negative returns to limit falls in a portfolio’s value when equity markets go south,” Tyler said.

Tyler pointed to research compiled by Daintree Capital that indicated a portfolio compiled of 50% ASX100 shares and 50% an index fund tracking the AusBond Credit FRN Index would have generated around half the volatility of a pure equities portfolio from 2005 to the present day.

“Australian retirement funds on average have just a 14% allocation to bonds, compared to a 22% average in the US and 36% in the UK^[2], so it would seem that those approaching retirement are taking excessive risks with their savings in exposing themselves to the twists and turns of the equity market,” he said.

“This is particularly the case given that Australian retirement savings are made up almost entirely of ‘defined contribution’ style schemes – meaning income in retirement is dependent upon the investment returns generated by the fund, rather than linked to an individual’s working salary as it is in many other markets.”

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[1] Source: Willis Towers Watson
[2] Source: Willis Towers Watson

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