New fund to focus on the short term

Antares Capital, the fixed income and equities manager backed by NAB Wealth and MLC, will launch a new income fund targeted at investors with a short-to-medium term time horizon by the end of March.

The fund, which has been soft launched to MLC’s aligned network of advisers, will be managed by the Antares fixed income team headed by portfolio manager Ken Hyman. It will complement the three new inflation-plus strategies, which were launched in December as part of the MLC Horizons series of diversified funds.

MLC head of investments Susan Gosling (pictured) said retirees had a perennial need for income but today’s financially repressed investment environment was forcing them to choose between taking on greater risk or accepting a lower rate of return.

She said actively-managed funds that delivered returns above inflation, even when markets were weak, formed part of the solution but typically had longer-term time horizons of three to ten-plus years.

Hyman said the new fund would meet the two-to-three year liquidity needs of retirees while focused on capital preservation and “making the most of what we think are expensive yield levels”.

“Retirees have short term cash flow requirements so they need a regular income to pay the mortgage and bills,” he said.

“If they don’t construct their portfolio properly they may be forced to sell down longer-dated assets at unfavourable prices to meet short-term liquidity requirements, which they don’t want to do. This fund is long term in nature and will help retirees protect the purchasing power of their assets but provide them with sufficient income.”

Hyman said investors and advisers were currently faced with term deposit rates below 4 per cent which made it difficult to justify locking money away.

“Investors have done okay out of longer dated term deposits over the last two years, which have deliver 6 or 7 per cent, or even 5.5 per cent, but as these TDs are being rolled over, advisers are experiencing stage fright,” he said.

“They’re now looking at yields of 3.5 to 3.75 per cent, so advisers are in a dilemma.”

Gosling attributed the significant inflows into the group’s new inflation-linked series as evidence that investors and advisers were looking for alternative solutions.

MLC Inflation Plus Conservative, Moderate and Assertive funds are now available on NAB Wealth’s administration platform, MLC Wrap. Investors in the MLC Horizons series, which ranges from the ultra-conservative Horizon 1 up to the high-risk Horizon 7, also have exposure to the new strategies.