Maturity Ladder Portfolio
Investment objective
Within the investable universe of XTBs to construct a fixed income model portfolio that aims to provide:
- A regular and predictable income stream
- Return of capital from maturing XTBs on an annual basis
- A capital preservation focus and low levels of price volatility
- An absolute return that is above returns on term deposits
- Liquidity, to ensure investment flexibility
Model portfolio manager
Australian Corporate Bond Company Limited (ACBC)
Investment strategy and approach
To ensure the best opportunity to meet the model portfolio’s objectives, ACBC selects a portfolio of XTBs using a 2-stage quantitative process, with a qualitative overlay.
Quantitative process
Stage 1: Selection
Define the investment universe of:
- Rank by increasing maturity date
- Rank by highest yield to maturity
- Investment grade credit only¹
- Weighting parameters (issuer, security, sector²)
- Available liquidity
¹ At time of establishment
² As defined by GICS Sub Industry
Stage 2: Application
Apply a set of rules to select an optimal XTB maturity ladder model portfolio.
Qualitative overlay
Adjustments may be made to the portfolio. These adjustments may be made to reflect market conditions, despite the rules being satisfied.
The general approach is to hold securities to maturity and have a security mature on a yearly basis. However, model portfolio changes may be made in response to:
- An increase in the yield to maturity, by adding securities
- An increase in the universe of available securities
- Improvement to the portfolio, by switching securities
Designed for investors who…
- Seek a transparent and capital-stable fixed income model portfolio that offers a regular and predictable income stream
- Seek a return of capital on a yearly basis to manage their cash flow requirements
- Are looking for lower risk than equities & hybrids and higher returns than ‘cash-like’ investments
Portfolio parameters
| Parameters | |
| Inception date | 14 July 2016 |
| Investment universe | Available XTBs, fixed or floating |
| Minimum number of securities | 5 |
| Minimum credit rating | Individual bonds must be investment grade at the time of inclusion within the model portfolio |
| Maximum individual issuer exposure | 30% |
| Maximum individual security weighting | 20% |
| Maximum individual sector² weighting | 30% |
| Capital structure parameters |
|
| Benchmark | RBA cash rate |
| Maximum maturity | Maximum maturity of 8 years per security |
| Liquidity | All XTBs must have sufficient observable liquidity |
View portfolio rules and maintenance
View Model Portfolio Performance Reports
Request this portfolio
To request more information about this portfolio, and receive details of the XTBs included within the portfolio please contact us, or complete the form on the link below:
Tel: 1800 995 993
Email: advisers@xtbs.com.au
