IFM's Alternative Fixed Income Fund (AFIF)
The IFM Alternative Fixed Income Fund (AFIF) is an actively managed, Australian focused broad credit fund that seeks to add value through superior credit selection and analysis. Credit is a compelling opportunity given the attractive returns and diversification benefits. However, managing credit requires significant resources, a clear focus, specialist skills and ongoing management. Part of the AFIF value proposition is that investors accept relatively lower liquidity for the value adding credit profile.
Key benefits of investing in AFIF
- Experienced team of debt specialists that are recognised for their niche credit expertise
- Rigorous bottom-up credit skills within a disciplined investment process
- Superior access to deal flow through our extensive networks
- Specific expertise in infrastructure debt, securitisation, structured and project finance
- Demonstrated track record of long term outperformance
- Capture additional return associated with the complexity of the investments
- Aligned long-term interests
- A wide diversification of exposures; notably more diversified than a traditional fixed income index
- Choice of two interest rate duration portfolios.
Investors can choose between a long interest rate duration and short interest rate duration version of AFIF.
- AFIF Long (benchmarked to the UBS Composite Bond Index, interest rate duration around 4.0 years)
- AFIF Short (benchmarked to the UBS Bank Bill Index, interest rate duration around 0.12 years)
AFIF Long and AFIF Short both invest in the same underlying diversified portfolio of Australian focused credit assets and have the same credit risk profile – the only difference is their interest rate duration. Investors are able to switch between AFIF long and AFIF short, allowing investors to tailor their interest rate duration as desired.
Our broad credit investment approach draws on the best of banking and investment management philosophy and process. We combine intensive, bottom-up internal credit analysis with top-down macro inputs within a risk-controlled framework. Strong credit disciplines are underpinned by rigorous internal analysis – we do not rely on external ratings agencies. IFM internally rates all investments regardless of whether they carry an external credit rating, drawing on considerable analytical resources, extensive business infrastructure and legal expertise.
IFM’s credit investment processes adopt strong credit disciplines underpinned by a rigorous, bottom-up analysis across a six stage process:
- Asset screening and portfolio fit
Our extensive market contacts provide access to a wide range of high quality transactions. Our approach to seeking value means that we screen as many potential transactions as possible, rejecting transactions with unfavourable risk and return profiles, or those which do not align with portfolio and client needs. The team’s extensive experience in credit and infrastructure debt markets has bred an intimate understanding of capital markets and a wide network of contacts. These extensive market contacts provide access to wide range of high quality transactions. IFM is a desired investor sought out by borrowers and deal arrangers alike for major new public and non-public credit issuance.
- Fundamental credit analysis
All investments are internally rated through a bottom-up analysis at the micro level, within a macro framework. We seek to understand factors such as the key drivers for the business sector and the determinants of industry cyclicality. We examine financial metrics, but more importantly what drives these. We go on to examine the risks of default and recovery prospect through stress tests and scenario analysis. We consider the borrower and, where relevant, its shareholders’ stability as well as legal and tax matters.
- Detailed written credit assessment
A detailed written credit assessment is prepared for review by the Global Head of Debt Investments and the Debt Investments Committee. We employ the discipline of written and transparent analysis that can be closely scrutinised by both peers and approval authorities to avoid untested and fuzzy assumptions. This document must withstand internal and potentially external scrutiny and also justify portfolio fit and value.
- Formal credit approval
IFM’s investment approvals regime provides clear delegated authority levels. Specific dollar thresholds apply at which the investment decision must be made by a higher authority such as the IFM Investment Committee and, ultimately, also the IFM Board Investment Committee.
- Monitoring, reporting and review
Ongoing management of the portfolio is critical. We continuously monitor both the macro environment as well as at the asset level, and also conduct periodic formal reviews.
- Compliance and risk management
We have strict compliance and risk management processes in place with oversight by IFM’s Risk Committee.