Benefits of investing in the Realm High Income Fund - Wholesale

Investment in the Fund offers the following significant benefits:

• access to an experienced, competent investment management team, with a broad and multi-faceted base of knowledge and experience; and

• access to a portfolio of fixed income assets acquired and managed by an experienced investment team who are not conflicted by agendas or incentives outside of managing the money.

Risk level
Medium

The Fund will primarily be invested within investment grade debt assets, however a portion of the Fund will be invested within sectors that do tend to experience higher volatility. On balance, the Investment Manager believes the Fund will expose the investor to a medium level of risk. This could be summarised as being below the risk and volatility of equities, but above that of high grade corporate debt. There is a risk investors may lose some or all of their capital.

Significant features

The Fund's investment philosophy is based on a core set of investment principles that the Investment Manager believes are indispensable. These core principles underpin the investment process and framework of the Fund and are as follows:

• experience counts;
  
• proactive origination of relationships, assets and risk drives quality outcomes;
  
• mistakes are severely punished;
  
• inefficiencies exist in all markets; and
  
• it is important to understand diversification and correlation.
  

Overall, the Investment Manager adopts an outward looking investment approach that is underpinned by a market intelligence gathering process. This research lead approach seeks to identify and exploit market inefficiencies for the benefit of the Fund.

Investment strategy

The objective of the Fund is to deliver a consistent return of approximately 300 basis points over the RBA overnight cash rate through the market cycle. Note this investment return objective is not a forecast. It is merely an indication of what the Fund aims to achieve over the medium term on the assumption that credit markets remain relatively stable throughout the investment term. The Fund may not be successful in meeting this objective. Returns are not guaranteed.

The Fund is a diversified, actively managed fixed income portfolio that invests in cash and domestically issued fixed interest securities. These securities include:

• debt issued by banks and corporations;
  
• mortgage and asset backed securities;
  
• government and semi-government bonds.
  

Across the market cycle the Team will evaluate and alter the level of credit risk according to their appraisal of the domestic corporate debt market, in the context of Australian and Global economies. The Fund's strategy affords the Team flexibility to invest across a wide range of asset classes across the credit cycle, based on:

• their outlook on international and domestic markets;
  
• direction of interest rates;
  
• corporate fundamental.
  

Combining a risk first approach to investing along with the Fund's flexible investment mandate and the use of proprietary models, the Team utilise their experience to allocate tactically and strategically to minimise volatility of returns.

How we invest your money

Mix of asset classes

Asset: Permitted Range / Target Range

• Domestic and Non-Domestic investment grade asset-backed, bank-issued and corporate bonds: 0-100% / 75-100%

• Domestic and Non-Domestic non-investment grade asset-backed, bank-issued and corporate bonds: 0-25% / 0-25%

The Fund's primary emphasis is to invest in domestic investment grade asset-backed, bank-issued and corporate bonds. Notwithstanding this primary emphasis, the Fund may also invest in Commonwealth and State government securities, inflation linked securities, hybrid securities, revolving credit facilities, bank term deposits, international agency, supranational debt and derivatives.

Derivatives can be used to implement investment decisions, including hedging, and as a risk management tool (such as managing the effect of interest rate or foreign currency movements). They may also be used to adjust or implement investment decisions and to gain, or avoid, exposure to a particular market rather than purchasing physical assets. In this regard, derivatives will only be used to gain exposures when they offer a more cost effective way of purchasing the underlying security.

All derivative positions will be fully funded. No leverage is possible when fully exposing and backing the derivative position. The Investment Manager's approach for the Fund embraces the philosophy that best practice management combines a complete top down assessment of key macro and regulatory drivers supported by a bottom up process which provides a ground level market view of issuers and their markets.

Approximately 75% of the Fund will be targeted at investment grade assets. These are assets which are considered entities and/or securities that have an internal or external credit rating of BBB- or higher. Issuers of investment grade securities are considered to have a strong capacity to meet their payment obligations (although no guarantee can be given about this matter). The Fund's returns will be driven by the Investment Manager's relative value assessment around sector allocation as well as security selection. This relative value screen is embedded in the top down portion of the Investment Manager's process.