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SQM Research Ratings Update -  Monday
July 6th 2015
Property Valuations
Research Reports
Discounted/Distressed Properties
Funds Research
Ratings Table

To see the entire table of SQM Research's fund ratings, click HERE

(Please note: In order to view individual ratings reports you must be subscribed to SQM Research Ratings research. To subscribe, click HERE)

 

SQM Research Ratings Update

 



- With Rob da Silva - Head of Research


 
SQM Research releases the ratings of Principal Global Credit Opportunities Fund and Millinium Fixed Income Fund.
 
These Funds operate with different styles and processes while achieving good performance results against their respective benchmarks. They access different segments of the broad fixed income universe with Principal focusing on global credit and Millinium concentrating on domestic issues.

                                                  *******

The Principal Global Credit Opportunities Fund (the Fund) is an open-ended unlisted trust that invests in a wide variety of credit-based fixed income securities, primarily but not exclusively in the US market.

The Fund aims to achieve a total return above the Barclays Global Aggregate Corporate Index (hedged to AUD). It focuses on extensive credit research and active security selection to drive the bulk of returns. Broader portfolio parameters such as duration and sector allocation are guided by top down processes that:

•Assess the systemic risk environment (through a Dynamic Risk Score) and
•Evaluate the relative investment merits of sectors/industries with a framework focusing on fundamentals, technicals and valuation (compiled into an “FTV” score).

The Fund has a relatively broad mandate across fixed income sectors and can invest up to 50% in below-investment grade securities. The security selection process pays attention to the liquidity of the bonds and generally favours those that have better levels of liquidity and tradability.

The Principal Global Investors Fixed Income Group has significant resources and a large analyst team dedicated to fundamental bottom-up security and sector specific research combined with quantitative analysis.

The Fund has received a 4.00 - star rating.

This is classified as a “Superior” rating and reflects SQM Research’s opinion that the Fund is suitable for inclusion on most APLs.

This inaugural rating for the Fund reflects a number of key features: long standing corporate tradition of fixed income investing stemming back to origins as a life insurer, depth and breadth of credit analyst resources, qualified and experienced investment team, disciplined investment process focusing on key fundamental and valuation factors.
 
                                                  *******

The Millinium Fixed Income Mandate (the Fund) is an open-ended unlisted wholesale trust that invests in a focused portfolio of investment grade, AUD denominated fixed income securities.

The Fund aims to achieve a total return above the Bloomberg AusBond Composite 0+ Index. It focuses on quantitative filtering methods to determine active security selection, which drives the bulk of returns. At the broader level, portfolio duration is determined by top down processes that include macro-based models and the subjective assessment of the portfolio manager.

The Fund invests in investment grade securities denominated in AUD. Securities issued by foreign companies/governments are permitted provided they are denominated in AUD. Securities issued by Australian companies/governments in foreign currencies are not permitted. It is a concentrated portfolio and typically holds 15 to 30 securities (currently 17).

While the Millinium Fixed Income team is relatively small, it is adequate given its funds under management and quantitative approach to security selection

The Fund has also received a 4.00 - star rating.

This is classified as a “Superior” rating and reflects SQM Research’s opinion that the Fund is suitable for inclusion on most APLs.

This inaugural rating for the Fund reflects a number of key features: a quantitative approach to security selection, go
od performance record, a high-conviction concentrated portfolio, a small team lead by Mark Phillips (CIO) who has 25 years investment experience.

                                                *******

SQM Research has also released the rating for The 91 Phillip Street Fund.  

The 91 Phillip Street Fund (the Fund) is an unlisted property syndicate, investing in a single, modern commercial office building located within the Parramatta CBD a suburb 23km west of Sydney.

The Fund aims to provide investors with a stable and sustainable income return forecast expected to be 8.00% p.a. over the first two years, with the potential for capital growth. The term of the Fund is five years, which may be extended by a majority vote of investors by a further two years if conditions are not appropriate to sell. The Fund has a high quality diversified tenancy mix with staggered lease expiries and a WALE of 3.4 years (by income). The passing yield of the asset at acquisition will be 8.0%.

The Fund has received a 3¾ - star rating.

To read the full reports, 
click here...


Research Methodology

In general, the assessment approach adopted by SQM Research incorporates a combination of qualitative and quantitative research techniques to assess property investment products,
 
Information generated is passed through the SQM Research assessment model at the completion of the assessment process. The assessment model generates a product score, which correlates to a specific star rating (out of a maximum of five stars). Each star rating covers a scoring range, allowing products to be ranked within quarter star increments.
 
Following are descriptions for each of the star ratings, which have been developed as a guide for dealer group research teams and investment committees:

4.5 stars and above – Outstanding. Highly suitable for inclusion on APLs.

4 stars to 4.25 stars – Superior. Suitable for inclusion on most APLs.

3.75 stars – Favourable. Consider for APL inclusion.

3.5 stars – Acceptable. Consider for APL inclusion, subject to advice restrictions.

3.25 stars – Caution required. Not suitable for most APLs.

3 stars – Strong caution required. Not suitable for most APLs.

Below 3 stars – Avoid or redeem. Unapproved.

Hold – The rating is currently suspended until SQM Research receives further information. A rating is typically put on hold for a period of 2 days to 4 weeks.

Withdrawn – The rating is no longer applicable. Significant issues have arisen, and investors should avoid or redeem units in the fund.


About SQM Research
 
SQM Research Pty Ltd is an independent property advisory, ratings and forecasting research house which specialises in providing accurate property related advice, research and data to financial institutions, property developers and real estate investors.
 
For more information please visit 
www.sqmresearch.com.au

Copyright © 2015 SQM Research, All rights reserved.

Our mailing address is: GPO Box 3611, Sydney, NSW 2001, Australia



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