Q&A

Who is the Long Short Credit Fund (LSCF) suitable for?

An investment in the Fund may be suitable for investors seeking:

  • target returns of the "neutral" RBA cash rate plus 4% to 6% p.a.,
  • targeted volatility of less than 5% p.a.,
  • a suggested investment timeframe of 3 years or more, and
  • no or low correlation with mainstream asset classes such as equities, fixed-rate bond and property markets.

The Fund aims to reliably distribute strong quarterly income. It offers daily investment applications and withdrawals.

It is not recommended that the Fund be used for short-term investments.

LSCF may be suitable for:

  •     Savers looking to grow a diversified portfolio over the long-run;
  •     Investors who want diversification away from equities, property and fixed-rate bonds; and
  •     Institutional investors that want an absolute return fixed-income solution.

To work out whether LSCF meets your needs, please download a copy of the PDS and speak to an independent financial adviser.

What is the fund’s investment objective?

LSCF targets generating absolute returns of 4% to 6% p.a. above the "neutral" RBA cash rate after Management Fees, Administration Fees and Performance Fees with less than 5% p.a. volatility over rolling 3 year periods, and low to no correlation with equities, fixed-rate bonds, and property markets.

The investment objective is not intended to be a forecast. It is only an indication of what the investment strategy aims to achieve over a rolling 3 year period. The Fund may not achieve its investment objective. Neither returns nor the money you invest in the Fund is guaranteed and you may lose some or all of your money.

How long does it take to process my investment?

Once we receive your verified application:

Day 1 Your account is set-up
You transfer funds to us (BPAY or EFT)
Day 2 Cleared funds become available (business days)
Your money is invested and  earnings commence
Day 5 Fund units are allocated to you
An email is sent to you with a Statement and website login details
How long should I expect to keep my money invested with you?

Whilst LSCF offers you the ability to make daily investment and withdrawal requests, it is best suited to individuals and institutions looking to invest their money for 3 years or more. The fund is not suitable for use as a regular transactional account.

What is the investment strategy?

The Fund offers investors exposure to assets that are traditionally defined as defensive, including:

  • cash and cash equivalents,
  • senior and subordinated bonds,
  • hybrid securities, and
  • Asset-backed securities.

In addition to these physical assets, the Fund may also invest in a range of derivatives to express its strategy, including:

  • interest rate derivatives,
  • credit derivatives,
  • foreign exchange derivatives,
  • equity derivatives, and
  • other related swaps and repurchase agreements.

The majority of the Fund’s portfolio will be invested in assets of investment-grade quality, which means assets with at least a BBB- credit rating from a recognised rating agency.

While the Fund does not target equities investments, focusing on securities ranking higher up the capital structure, it can invest in equity derivatives (typically for hedging purposes) and hold equities as a result of its bond, hybrids and/or derivatives converting into shares.

The Fund does not expect to assume significant interest rate duration risk, which is limited to 24 months. This means the Fund expects to be mainly invested in floating-rate securities and/or fixed-rate securities that have had their interest rate risk hedged.

The Fund does not have a maximum or minimum exposure to cash or debt/hybrid securities. It may be fully invested in either depending on the magnitude of the potential mispricings the Portfolio Manager has identified.

Naturally, the Fund is not the same as a bank account. See the Risks section of the PDS for details.

Derivatives and short selling

A derivative is any financial product that derives its value from another security, index or liability.

The Fund uses derivatives to take investment positions and to manage (or ‘hedge’) risk. Their use is central to the investment strategy of the Fund, employed so that the Fund can take long and short positions.

The types of derivatives can vary and may include:

  • interest rate derivatives,
  • credit derivatives,
  • foreign exchange derivatives,
  • equity derivatives, and
  • other related swaps and repurchase agreements.

Short sales involve selling an investment you do not own in anticipation that the investment’s price will decline. Short sales are important as they can generate performance in declining markets or provide a hedge to long market exposure.

But they present a risk on an individual investment basis, since the Fund may be required to buy back the investment sold short at a time when the investment has increased in value, which would generate a loss.

Leverage

The Fund can take long and short positions, borrow and use derivatives and this can mean the Fund is geared (or leveraged).

Leverage can amplify gains and also amplify losses.

The Portfolio’s manager’s approach to leverage is relatively conservative. At the core of the Portfolio Manager’s use of leverage is that it is applied against relatively conservative debt securities and hybrids which display high liquidity and which rank ahead of equities in the corporate capital structure.

Complementing this conservative asset class approach, the Portfolio Manager has set direct and indirect leverage limits to assist risk management, which is overseen by the Portfolio Manager’s independent compliance committee. The rules are asset-class specific, with riskier exposures subject to tighter controls. They are designed to reduce the risk of loss and manage portfolio volatility within the target range.

Please refer to the PDS for more details on this subject.

Volatility

Volatility is a measure of how the return of an investment fluctuates around its average level over time. If an investment is more volatile than, say, cash, this means its returns tend to move up and down around their average level more sharply and/or regularly than a cash investment does.

The Fund’s goal is that over rolling 3 year periods, return volatility averages less than 5% p.a. or around one-third the historic volatility of the Australian equities market.

What are the risks of investing in LSCF?

All investments carry risk. Different strategies may carry different levels of risk depending on the assets that make up the strategy and assets with the highest long-term returns may also carry the highest level of short-term risk. Returns are not guaranteed. You can learn about the Fund's risks in the PDS.

Who is the Fund’s Administrator and how do I contact them?

The Fund administrator and unit registry is FundBPO Pty Ltd (they are based in the Sydney CBD). All enquiries to the fund administrator are as follows:

FundBPO Pty Ltd
Phone: 1300 133 451
Email: registry@fundbpo.com
Fax: 02 9251 3525

Who is the Fund’s Investment Manager?

The investment manager is Smarter Money Investments Pty Ltd, which has appointed a sub-investment manager, Coolabah Capital Investments Pty Ltd. For general questions on our products, please contact:

Smarter Money Investments Pty Ltd
Phone: 1300 901 711
Email: info@smitrust.com.au

Who is the Fund’s Responsible Entity (Trustee/Manager)?

OneVue RE Services Limited ("RE") AFSL 223271 ABN 94 101 103 011 is the responsible entity. The role of a responsible entity includes holding the fund's assets or investments on trust for the unit holders in accordance with the financial services laws and the fund's constitution. The RE is an Australian financial services business that provides responsible entity services to a number of successful fund managers.

How do I make a complaint?

If you wish to discuss any aspect of the fund or wish to lodge a complaint please send your complaint in writing to the Compliance Manager at the RE, Level 5, 10 Spring Street, Sydney NSW 2000. We will confirm receipt of your complaint within 7 business days.

If you have not received a satisfactory response or 45 days have elapsed, you may refer the matter to the Financial Ombudsman Service Limited (FOS): Telephone 1300 780 808 (free call from Australia), or by email at info@fos.org.au or in writing to Financial Ombudsman Service, GPO Box 3, Melbourne, VIC 3001, Australia.

FOS is an independent body and is approved by ASIC to consider complaints. In order for a complaint to be considered by FOS, the claim must be less than $500,000 (unless the Responsible Entity and you agree otherwise in writing).

If you are investing through a master trust or wrap account then enquiries and complaints should be directed to the operator of that service, and not to Select.