A floating-rate note (FRN) is a bond where the coupon rate is based on a reference rate plus a spread.
FRN's offer investors:
Market expectations for monetary tightening in the medium-term has increased. Markets are pricing multiple rate hikes by the Reserve Bank of Australia beginning in 2024. 2
The State Street Floating Rate Fund (the Fund) is a portfolio of high quality, Australian, interest-bearing investments which is actively managed to preserve capital while delivering monthly income. The portfolio average credit quality is A+/A.
The Fund offers the following characteristics:
Capital Preservation and Liquidity
Hedge to Rising Rates
View Fund Performance and Holdings
Investors have clearly defined expectations for cash and liquidity strategies centred on capital preservation, liquidity, and yield. To enhance this, we employ an ESG aware lens in the Fund, because it provides a complementary signal about credit quality.
Our ESG scoring system is called R-Factor™, and it has been incorporated into the Fund’s investment process in two ways.
The Fund is available directly or through a number of platforms. 3
Zenith* Recommended (June 2021)
Lonsec** Recommended (August 2021)
With the Term Funding Facility having expired on 30 June and interest rates are being kept at 0.10% will there be a flood of issuance in bank primary market paper causing spreads to sell off as the Australian money market struggles to absorb new issuance?
1 As at 30 June 2021. Compared to other bond market segments including: Global Aggregate Bond, US High Yield, Hard Currency Emerging Markets Debt, Senior Loans, Australia Government and Australia Credit.
2 1 year IOS Rate 2yr forward. Source: Bloomberg Finance L.P., as of 31 March 2021.
3 Please check with the platform operator for minimum investment requirements and fees.
4 As of 30 June 2021. Source: State Street Global Advisors.
* Zenith: The Zenith Investment Partners (“Zenith”) Australian Financial Services License No. 226872 rating (SST4725AU: June 2021) referred to in this document is limited to “General Advice” (s766B Corporations Act 2001) for Wholesale clients only. This advice has been prepared without taking into account the objectives, financial situation or needs of any individual and is subject to change at any time without prior notice. It is not a specific recommendation to purchase, sell or hold the relevant product(s). Investors should seek independent financial advice before making an investment decision and should consider the appropriateness of this advice in light of their own objectives, financial situation and needs. Investors should obtain a copy of, and consider the PDS or offer document before making any decision and refer to the full Zenith Product Assessment available on the Zenith website. Past performance is not an indication of future performance. Zenith usually charges the product issuer, fund manager or related party to conduct Product Assessments. Full details regarding Zenith’s methodology, ratings definitions and regulatory compliance are available on our Product Assessments and at http://www.zenithpartners.com.au/RegulatoryGuidelines
** Lonsec: The Lonsec Ratings (assigned as follows: (SST4725AU: August 2021) presented in this document are published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421445. The Ratings are limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial products. Past performance information is for illustrative purposes only and is not indicative of future performance. They are not a recommendation to purchase, sell or hold State Street Global Advisor products, and you should seek independent financial advice before investing in these products. The Ratings are subject to change without notice and Lonsec assumes no obligation to update the relevant documents following publication. Lonsec receives a fee from the Fund Manager for researching the products using comprehensive and objective criteria. For further information regarding Lonsec’s Ratings methodology, please refer to our website at: http://www.lonsecresearch.com.au/research-solutions/our-ratings
Issued by State Street Global Advisors, Australia Services Limited (AFSL Number 274900, ABN 16 108 671 441) (“SSGA, ASL”). Registered office: Level 14, 420 George Street, Sydney, NSW 2000, Australia · Telephone: +612 9240-7600 · Web: www.ssga.com. State Street Global Advisors, Australia, Limited (AFSL Number 238276, ABN 42 003 914 225) (“SSGA Australia”) is the Investment Manager.
References to the State Street Floating Rate Fund ("the Fund") in this communication are references to the managed investment scheme domiciled in Australia, promoted by SSGA Australia, in respect of which SSGA ASL is the Responsible Entity. This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the product disclosure document, at www.ssga.com, before deciding whether to acquire or continue to hold units in the Fund. Investing involves risk including the risk of loss of principal.
This general information has been prepared without taking into account your individual objectives, financial situation or needs and you should consider whether it is appropriate for you. You should seek professional advice and consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD), available at www.ssga.com, before deciding whether to acquire or continue to hold units in the Funds.
This material should not be considered a solicitation to apply for interests in the Funds and investors should obtain independent financial and other professional advice before making investment decisions. There is no representation or warranty as to the currency or accuracy of, nor liability for, decisions based on such information.
Investing involves risk including the risk of loss of principle.
Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. This information should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.
Floating rate securities are often lower-quality debt securities and may involve greater risk of price changes and greater risk of default on interest and principal payments. The market for floating rate securities is largely unregulated and these assets usually do not trade on an organized exchange. As a result, floating rate bank loans can be relatively illiquid and hard to value. Investing involves risk including the risk of loss of principal. Diversification does not ensure a profit or guarantee against loss.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA Australia’s express written consent.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.
The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA’s Australia’s express written consent.
31/08/2022 | 3658141.1.6.ANZ.RTL