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Gross performance returns and benchmark performance shown do not include expenses, fees or tax. Net performance returns are prepared on an exit-to-exit fee basis which includes all ongoing fees and expenses.

Market Review

• June proved to be another volatile month in risk assets which started the month weakly before a brief respite and then further weakness toward the end of the month. Reflecting those developments in risk assets government bond yields rallied strongly in the month.
• The issues which undermined risk assets in June were in large measure similar to those afflicting risk assets in May although their prominence was somewhat different.
• The fiscal issues in Europe, while nomeans less resolved, were less front and centre in June asmarkets grewmore convinced that themagnitude of the response fromthe European authorities was sufficient to address some of the near-term funding issues in themost affected countries in the European periphery.
• Of relatively greater importance were heightened concerns about a slowdown in the Chinese economy coupled with an unexpected apparent slowdown in the US economy.
• Some of the risks that we have been monitoring have increased over the past month.
• Positive surprises for macro-economic growth and inflation data have generally weakened over the month. This softening has been led by the United States, where macro-economic surprise has turned negative.
• The weaker tone in leading indicators noted in May continued in June. Our leading indicators have fallen to flat, the weakest they have been in over a year. This weakness has been broad-based across all major regions and across both developed and emerging markets.
• While macro policy settings continue to be extremely supportive in general, fiscal policy has become less expansionary of late in Europe and potentially in the US. That said, we continue to expect a mid-cycle slowdown rather than a “double dip”, as monetary policy globally remains extremely supportive, with the potential for further quantitative easing if required.
• In Australia, the Reserve Bank of Australia (RBA) left the policy rate unchanged at 4.50% following an increase in May. However, with the emergence of further uncertainties in the global economy and the fact that the RBA now considers interest rates to be close to their “average” levels, we expect that any future increases will need to at least await the release of the June quarter CPI figures in late July and will certainly be less frequent.
• Reflecting the renewed bout of risk aversion in global markets, Australian bond yields again fell sharply in June.
• Those same developments saw credit spreads on subordinated financial company bonds, to which the Fund retains an overweight exposure, increase which contributed to underperformance.
• Despite some uncertainties surrounding the outlook for global economic growth, the Reserve Bank of New Zealand (RBNZ) increased its policy rate (OCR) by 25 bps to 2.75% at its meeting on June 9th.

About the Fund

Investment objective

• Utilise duration, yield curve and credit strategies to generate an attractive return consistent with a diversified, professionally managed portfolio of quality Australian short-term money market securities.
• Provide investors with investment security, high levels of liquidity and maximum flexibility in dealing with their investments.
• Outperform its benchmark, the UBS Australia Bank Bill Index, by 10 basis points p.a. (before fees).
  

Fund strategy

BlackRock believes that superior investment performance results from an active management approach based on a clear view of the fundamental forces that drive interest rate and credit markets. We utilise research-based knowledge, fundamental credit analysis and the requisite skill base to access diverse opportunities, together with a disciplined approach to risk management to enhance value through duration and credit management.

Designed for investors who…

• Seek lower volatility in the capital value of the investment and modest capital growth.
• Seek a regular monthly income.
   

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