AMYF Series Overview

The Australian Masters Yield Fund Series (‘AMYF’) provides investors with exposure to portfolios of fixed income securities.

From an investor’s perspective, fixed income securities can generally provide a lower level of capital risk than equities and more predictable income stream in certain circumstances. This is because fixed income securities are generally less risky because unlike equities an investor has no ownership interest in the corporation. Fixed income investments may offer investors the following benefits:

  • Capital stability;
  • Attractive risk adjusted returns;
  • Regular income;
  • Diversification; and
  • The ability to diversify the range of portfolio maturities.

Each Company invests in fixed income securities that may be issued either in Australia or internationally and intends to provide Australian and New Zealand investors with the opportunity to gain exposure to fixed income securities with attractive risk adjusted returns. Investments may include, but are not limited to:

  • Senior bonds;
  • Subordinated debt;
  • Hybrid securities; and
  • Structured income securities.

OVERVIEW OF FIXED INCOME SECURITIES

Fixed income securities are issued by entities such as government bodies and corporations in order to raise funds. They are typically financial obligations to pay a specified sum of money to the investor at future dates. Payments can be linked to a fixed interest rate or via a set margin over a variable interest rate benchmark.

Fixed income securities fall into 2 general categories:
1. Debt obligations; and
2. Preferred equity/hybrid securities.

Both typically rank ahead of claims of ordinary shareholders in the event of insolvency. The specific structure of a fixed income security can vary significantly depending on the issuer, structure, term, coupon type and level of subordination.

Where an investment sits in the debt and equity structure of an entity is a key determiner of whether the return adequately compensates the investor for the risk involved. Equities are considered the highest risk and should provide the greatest returns. In contrast, debt securities sit higher in the debt/equity structure of an entity and have preferential treatment for returns along with being safer in the event of liquidation, as debt holders have a claim on assets before equity holders.

overview diagram

The risk of a particular debt issuance is directly related to the ability of a holder to make claims on the assets of the issuer relative to other debt obligations, as well as the underlying creditworthiness of the issuer. The more senior an instrument’s claim on underlying assets of the issuer, the higher the associated credit worthiness of the investment and the lower the risk.