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 1300 366 100

06 January 2009
Managed Income

Managed Income Fund Update

June Quarter 2007


Download the Managed Income Fund Update

Download the Funds Performance report


The performance shown in the Fund Update is the gross performance of the fund. To view the net performance of the fund or of the different unit classes of the fund download the Fund Performance Report or visit Fund Performance.

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.


Fund outlook

  • Global economic growth strengthened in the June quarter as the US economy rebounded led by an improvement in the manufacturing sector.
  • Global central banks in the developed economies continue to gradually tighten policy and this combined with the diminished prospects of easing by the US Federal Reserve resulted in quite a significant back-up in global bond yields over the quarter.
  • Credit spreads also widened late in the quarter as concerns about sub-prime mortgage debt re-surfaced.
  • Global equity markets performed strongly again supported by very good liquidity conditions and a benign economic backdrop of robust growth and relatively low inflation. Core inflation in the US subsided over the quarter helping to allay fears of a resumption of Fed tightening this year or early next year.
  
*This composition is representative of the composition of the Wholesale Managed Income Fund. Slight variations however do occur between the Funds.

In Australia
  • Economic growth has unambiguously strengthened in the first half of 2007, but wages growth and inflation remains well contained which has kept the Reserve Bank on the sidelines so far. Combined with a very supportive supply/demand backdrop, this has been a very positive environment for Australian equities which performed strongly again over the quarter.
  • The AUD also rallied again over the quarter (to an 18-year high against the $US) with long-term commodity price expectations continuing to be revised higher.
  • The Fund had no exposure to unhedged global assets during the quarter.

Performance contributors

  • The strategies which added value in the quarter were asset allocation and stock selection in Australian equities, Australian fixed income, floating rate notes and direct property.
  • There were no strategies which detracted significantly from performance.

Performance review

 
Gross returns
Benchmark returns#
Out-performance*
3 Month
3.81%
2.25%
1.56%
6 Month
7.29%
4.51%
2.78%
1 Year
13.37%
10.63%
2.74%
2 Year (pa)
11.35%
9.87%
1.48%
3 Year (pa)
11.34%
9.86%
1.48%
5 Year (pa)
9.48%
8.59%
0.89%
Past performance is not a reliable indicator of future performance.
#The Fund is a diversified fund so the benchmark consists of a weighted average of the returns provided by market indices for the relevant asset classes.
*Shows the difference between Gross return and Benchmark return.
Gross performance figures quoted are calculated with no allowance for management fees, operating expenses or tax on income. Long-term performance shows the potential volatility of returns over time.

Wholesale Managed Income Portfolio as at 30/6/2007

Floating Rate Notes
Credit Rating Exposure
  
Sector Exposure
AAA
2.87%
Domestic Issuers
15.61%
AA
10.43%
Glob Corp in AUD
2.01%
A
48.87%
Global Swapped in AUD
66.25%
BBB
26.69%
Mortgage & Asset Backed
9.22%
BB
2.92%
Liquidity
6.92%
B
0.51%
    
Unrated
0.79%
    
Liquidity
6.92%
    
Percentages may not total 100% due to rounding.

Investment objective

The primary aim of the Fund is to provide investors with a regular monthly income and some capital growth. We aim to achieve this goal by out-performing the benchmark asset allocation over rolling three year periods.


Fund strategy

The investment goal of the Fund is pursued by investing a minimum of 65% of the portfolio in cash and fixed income as well as up to 35% in growth assets. The cash and fixed income portfolios are managed with the aim of providing an income stream through the year while aiming to maintain the portfolio’s capital value. This is achieved by investing in a variety of Australian and internationally sourced interest bearing instruments – for example, government, corporate fixed income securities and convertible notes. A substantial portion of the Fund’s total investment in cash and fixed income is invested in floating rate notes (“FRNs”). These are debt securities whose interest rates are adjusted in line with the bank bill rate. This also includes domestic and foreign fixed income debt securities swapped to Australian dollar floating so that the exposures are also adjusted in line with the bank bill rate. The aim of these investments is to generate a regular monthly income stream.

The growth component is predominantly a portfolio of Australian shares and property (direct and listed), but may also include a selection of international and infrastructure shares. The aim of these investments is to generate a regular monthly income stream, as well as some capital growth. In managing the Fund we gain exposure in asset classes directly or through other wholesale funds that we, or members of our group, manage. Sd

Designed for investors who…

  • Seek lower volatility in the capital value of the investment and some capital growth, and
  • Seek a regular monthly income.
BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFS Licence Number 230523 RSE License No L0000116
The Merrill Lynch name and logo are trade marks of, and used under license from, Merrill Lynch & Co., Inc.