High Yield Portfolio
Quantitative rules
All bonds in XTB universe:
- After meeting the portfolio parameters, a base case portfolio will be defined as the Portfolio Base Case (PBase)
- Portfolio Base Case (PBase) will consist of four XTBs, removing the following:
- The XTB with the highest YTM
- Any XTB where the ‘Change in Credit Spread’ has moved by more than (30%) in the previous two months, where the Change in Credit Spread = XTB Asset Swap – Aust Itraxx
- XTBs will be added to PBase to create Portfolio Final (PFinal)
- PFinal shall not have a YTM less than 95% of PBase
- Where PFinal does not meet Portfolio Parameters:
- Maximum individual issuer exposure, and/or
- Maximum individual sector weighting, an XTB will be selected from the next available XTB within the YTM ranking table
Maintenance of the portfolio
- The portfolio will be reviewed monthly on the second Wednesday of each month
- All changes in the portfolio will be made in expectation there can and will be a bid and offer on the XTB on ASX (no underlying bond liquidity will mean no XTB liquidity on ASX and so a portfolio change to that XTB may not occur)
- Only increase the number of XTBs in the portfolio, if it increases the YTM by 5% (as a percentage of the rate, e.g., 3.50% to 3.68%)
- Only switch an XTB (sell an XTB and buy a new XTB), if it increases the YTM by 5% (as a percentage of the rate)
Maturity Ladder Portfolio
Quantitative rules
All bonds in the XTB universe:
- Rank all XTBs in increasing maturity
- Select 1 XTB with a minimum tenor of 1 year to maturity (for example, if the model portfolio is reviewed on 24 May 2016, select the first XTB with a maturity in 2017) and with the highest yield available
- Select 1 XTB from the following calendar year (2018) and repeat assuming the next XTB has a maturity greater than the XTB selected with a 2017 maturity
- Repeat for each year
- Where the security issuer has more than 1 XTB, select the XTB with the highest yield available
Maintenance of the portfolio
- The portfolio will be reviewed monthly on the second Wednesday of each month
- All changes in the portfolio will be made in expectation there can and will be a bid and offer for the XTB on ASX (i.e., no underlying bond liquidity will mean no XTB liquidity on ASX and so a portfolio change to that XTB may not be made)
- Only increase the number of XTBs in the portfolio, if it increases the YTM by 5% (as a percentage of the rate. g., 3.50% to 3.68% )
- Only switch an XTB (sell an XTB and buy a new XTB), if it increases the YTM by 5% (as a percentage of the rate)
Monthly Income Portfolio
Quantitative overlay rules
All Floating Rate XTBs:
- Rank the Floating Rate XTBs by highest relevant BBSW + Trading Margin
- Overlay the income payment schedule for each Floating Rate XTB
- Ensure the portfolio has an income payment for each month
- Select the highest relevant BBSW + Trading Margin
Maintenance of the portfolio
- The portfolio will be reviewed monthly on the second Wednesday of each month
- All changes in the portfolio will be made in expectation of the Bid and Offer of the XTB on ASX
- Only switch an XTB (sell an XTB and buy a new XTB), if it increases the Trading Margin by 5% (a percentage of the rate)
Concentrated High Yield Portfolio
Quantitative overlay rules
All bonds in XTB universe:
- After meeting the Portfolio Parameters, a base case portfolio will be defined as the Portfolio Base Case (PBase)
- Portfolio Base Case (PBase) will consist of five XTBs, with the highest yield to maturity
- Any XTB will be removed where the ‘change in credit spread’ has moved by more than (30%) in the previous two months, where the Change in Credit Spread = XTB Asset Swap – Aust Itraxx. An XTB will be selected from the next available XTB within the YTM ranking table
Maintenance of the portfolio
- The portfolio will be reviewed monthly on the second Wednesday of each month
- All changes in the portfolio will be made in expectation of the bid and offer of the XTB on ASX
- Only switch an XTB (sell an XTB and buy a new XTB), if it increases the YTM by 5% (a percentage of the rate)
