Here’s the latest weekly COVID-19 investor wrap from Pendal Head of Bond, Income and Defensive Strategies Vimal Gor.

Watch this short video recorded at Vimal’s home office, or read the transcript below.

TRANSCRIPT: 

I’ll cover these weekly updates in three ways.

Firstly, we’re going to cover off on the virus pandemic. Secondly we’re going to look at the economic changes as they impact in the economies. And thirdly, we can look at the market response to those changes, the central bank and government action.

So firstly on the pandemic, it’s quite clear that the lockdown is having an effect.

Where people are doing a proper lockdown you can see the curves flattening off quite dramatically. And that’s exactly what we need to see because that’s what pushes the number of beds in the healthcare systems back, decreases the demand for ventilators and means that potentially we can weather the storm.

The problem is a number of countries are not locking down, most notably the US, and you can see that actually their numbers are the worst of any economy in the world right now.

As I mentioned last week, there’s a choice that governments need to make and that’s about crushing the economy or letting lives go.

And ultimately what you have to do is crush the economy because then you’re saving lives. And that’s obviously what a government’s mandate is.

But you question what the US is doing now because they’re not moving to full lockdown. I think they’ve got a fifth of the population in lockdown and Trump is talking about actually rolling some of that back in the next few weeks.

Well, that’s exactly the wrong situation because you can see their numbers are getting materially worse.

The economic data we’re seeing are absolutely terrible. And that’s across the globe. We could be looking at unemployment rates at 25% up to 50% in some economies. We could see GDP falling 25 to 50% in Q2 or Q3.

Everyone’s expecting strong bounce-backs in the latter half of the year. But I really get worried about what happens if we don’t see those bounce-backs.

And actually what we see is an L shape recovery or a very, very drawn out slow recovery, which is in contrast to the strong bounce that everyone else is expecting.

Impact of government actions

So since last week’s video, we’ve seen numerous actions by the authorities.

We saw increased quantitative easing by the US Government and we saw massive quantitative easing coming out of the RBNZ in New Zealand.

We’ve also seen the huge fiscal packages coming out in the US which — depending on whichever market report you’re reading — could be somewhere between $2 trillion and $4 trillion.

There’s a massive degree in leverage that can be employed, so it’s very difficult to actually get a handle, but we know they’re trying to backstop a number of businesses from going under.

That’s really what these packages are aiming to do. They’re trying to stop small businesses going down.

Because the problem is, most of the economy — well over 50% of the economy in the US and well over 50% of job openings in the US — are small companies. They’re companies employing less than 50 people.

So if that sector dies out, which it’s very clearly at risk of doing, when we get on top of the pandemic and the fiscal pulse begins to move the economy, you’ll have no impact because there’s nothing left to stimulate.

So the focus of governments very clearly across the world is to try and support the small business sector. So when the bounce-back has the ability to happen, it actually is able to be seen in the economic data.

We have this clear policy by central banks to drive bond yields across the world to zero, and to hold them there. And you can expect they’re not going to be hiking rates for many, many years.

That’s why if you’re able to buy US 2-years around 30 basis points, that pretty much looks a very good deal. Because you know they’re going to trade to virtually zero and just stay there forever. So that’s 30 basis points you’re going to make there.

You can be long Aussie threes because you know the RBA’s backstopping you at 25 basis points.

So if you buy at any level above that, it’s a good trade, and arguably they’ll trade through that 25 basis points level and then ultimately curves will pancake across the world and all bond yields will be heading to zero.

So we’ve got that by central banks. But then on the other side we’ve got this massive fiscal policy that’s coming out across the world. They’re trying to backstop the economy by supporting the smaller companies and making sure that we can bounce back.

That’s the key thing to be aware of here.

Market reaction

So now let’s move over to markets and see how markets are taking these changes.

Well firstly we’ve seen a very strong rally in bond yields. Obviously on the first part of this down move in equities, we saw bond yields rally massively.

We saw 10-year treasuries on or about just under 40 basis points. They backed up to 115. They’ve rallied since then quite materially. And right now 10-year treasuries are at 78 basis points.

They should head towards zero sometime over the next six months to year as well.

So again, being long bonds is a key way we’re positioning in these markets.

Obviously we saw the US packages trying to support investment grade credit, and they’re flooding the system with liquidity. They’re supporting investment grade credit out to four years effectively — not loan forgiveness, but loan holidays, these kind of things.

I just want to be quite clear here. They’ve bought the market time, but there’s a big difference between impact in solvency, and impact in liquidity.

It’s quite clear that the liquidity issues that were very, very prevalent in the market have been largely dealt with by the packages the Fed’s done.

But all the Fed’s done is address the liquidity issues, they haven’t addressed the solvency issues which encumber a number of these companies.

And the reason they have solvency issues is they massively geared up their balance sheet over the last few years.

So we’ve seen this bounce in investment grade credit. High yield has bounced in sympathy with it, but still looks like it could sell off, and Emerging Markets still looks a little bit worrisome to us.

So we’re still sitting more on the nervous side. We’re defensively positioned here.

We do acknowledge the fact that the markets are oversold and with the amount of ammunition that’s being thrown at them by governments and central banks, there is a high likelihood we get a bit of a bounce.

Certainly into month’s end, as a large scale, rebalancing is going to happen.

But the three-to-six month view, we’re still nervous about the valuation of risk assets and we like being long bonds here.

THE world rightly remains focused on reducing the awful human toll of the COVID-19 outbreak.

But as investors we know the crisis will pass. We also know our decisions in this type of environment are critical.

In every crisis there are opportunities. But sorting genuinely good value from assets that have simply fallen in price is the key.

The equity market falls in recent weeks, extreme volatility in almost all financial markets and uncertainty about the future path of the COVID-19 virus and global economy certainly provides the crisis.

Identifying the opportunities depends on the investor’s risk appetite and time horizon.

But if you are investing for the long term – which is at least five years – and take a disciplined approach to handling your money, opportunities are appearing.

Equity markets around the world have fallen by between 20 per cent and 30 per cent in recent weeks.

Potential buying opportunities

Notwithstanding the fact that volatility in markets is likely to remain, there are some specific equity markets that we view as potential buying opportunities.

They are the ones that were relatively cheap going into the crisis and where there’s evidence that their home country is doing a reasonable job of flattening the COVID-19 curve.

We like some of the Asian equity markets. Japan is looking extremely cheap. Unlike US corporations, their Japanese counterparts were actually reducing debt levels coming into this crisis.

Korea and Hong Kong are also good value. These Asian markets look quite attractive for investors who look through the short-term volatility and respect long-term valuations.

Of course it won’t always be smooth sailing. No country is going to be insulated from the global economic downturn.

Real estate

Real estate investment trusts (REITs) have not shown as many defensive qualities as in a typical down-market over the past month.

The price index of A-REITs and global REITs have fallen back to levels seen in mid-to-late 2008.

Some A-REITs are relatively high-yielding and contain good quality assets. When we get through this economic crisis investors will be looking for yields better than those based on a 0.25 per cent cash rate.

Assets like REITs are going to become much more attractive again. For long-term investors, REITS will provide yield and give exposure to real assets.

Infrastructure

Listed infrastructure assets also typically show defensive qualities, but this hasn’t been the case in recent times.

Assets within the category are not homogenous. Airports have naturally been hit hard and so have some listed energy infrastructure assets.

Within infrastructure, we have invested in private-public partnerships (PPPs). They have experienced massive volatility which doesn’t make much sense particularly when some of them house essential services such as hospitals and have governments as counterparties.

In addition, we are taking advantage of better valuations to build exposure to renewable energy.

In the fixed income market, investment-grade bonds are an attractive asset class. Credit spreads — the difference between sovereign and corporate debt — are at 324 basis points.

Source: Bloomberg; Bloomberg Barclays US Agg Corporate Avg OAS

In essence, that means you can buy an investment-grade corporate bond and get 3.24 percentage points higher yield than a government bond.

Through history, including during world wars, actual default rates on investment-grade bonds are low. The current large credit spread provides an attractive opportunity for investors.

The last time spreads were at this level was during the global financial crisis.

But the investor needs to have a five-year time horizon and should not be looking for immediate returns. And of course, there are some lower-rated corporate bonds, such as those from energy companies, that are riskier than others.

There has been indiscriminate selling in many asset classes. It may reflect leveraged investors needing to get out of assets.

In such an environment, if you are active and nimble, it’s a very good market environment to invest in as long as you have the right long-term horizon.

Pendal MicroCap Opportunities Fund

Important Updates

Pendal MicroCap Opportunities Fund (APIR: RFA0061AU, ARSN 118 585 354)

Effective 26 March 2020, the Pendal MicroCap Opportunities Fund (Fund)’s buy-sell spread will increase from 0.70% (with 0.35% payable on application and 0.35% payable on withdrawal) to 1.86% (with 0.93% payable on application and 0.93% payable on withdrawal). 

The buy-sell spread is an additional cost to you and is generally incurred whenever you invest in the Fund. The buy-sell spread is retained by the Fund (it is not a fee paid to us) and represents a contribution to the transaction costs incurred by the Fund such as brokerage and stamp duty, when the Fund is purchasing and selling assets. The buy-sell spread also reflects the market impact of buying and selling the underlying securities in the market. Importantly, the buy-sell spread helps to ensure different unit holders are being treated fairly by attributing the costs of trading securities to those unit holders who are buying and selling units in the Fund. 

Due to the impacts of COVID-19, investment markets have experienced substantial increases in volatility. For ASX listed micro capitalisation equities, this has resulted in higher trading costs.

Pendal will continue to monitor market conditions and review and update the buy-sell spread regularly as required.  You should therefore review the current buy-sell spread information before making a decision to invest or withdraw from a Fund.

Please refer to our website www.pendalgroup.com and click ‘Products’ for the latest buy-sell spread for each Fund.

THE spread of COVID-19 is exacting a great humanitarian and economic toll across the globe.

At times of heightened uncertainty there is an even greater need for patient, active and transparent investment management to help clients navigate this challenging situation.

A key component of this investment process is stewardship, in particular engagement with investee companies.

An active engagement program is an important way to identify investment opportunities as well as manage risks.

Fundamental to this is a long-term focus – beyond the rapid velocity of market moves such as those now occurring in response to COVID-19.

At this time we want to continue holding companies to account while preserving value in a manner that is constructive and focused on the most material issues.

Often these include environmental, social or governance (ESG) matters.

Last year Pendal fully-acquired specialist ESG research, engagement and advisory team Regnan, to enhance our responsible investment and stewardship practices.

The wide-ranging social and financial challenges associated with COVID-19 highlight a number of important ESG topics which will continue to form part of our investment and stewardship practices in the coming weeks.

Here, Regnan experts share their view on how this crisis is impacting existing and emerging ESG issues:

What we’re looking out for

The COVID-19 crisis is unique because its implications are truly economy and society-wide.

Government, business and not-for-profits all experienced financial stress during the Global Financial Crises — but the current COVID-19 risks are more widespread.

This outbreak brings multiple challenges such as business continuity planning, workforce planning and supply chain disruption.

These are all aspects we are researching and raising with companies where we have concerns.

The current crisis is stress-testing these policies, procedures and overall governance, including with respect to ESG.

Here are some of the key areas to watch during the COVID-19 crisis:

Board function

Right now company directors need capacity – particularly in maintaining critical business services such as delivery of health care and medical supplies and non-discretionary consumer goods.

The economy-wide implications of the COVID-19 crisis elevate risks for most sectors, posing unique challenges for corporate leadership.

This will test individual directors to respond in ways that address immediate business challenges and longer-term strategy.

These are the types of circumstances Regnan has long considered a risk for companies with over-committed boards.

It may give further weight to the case for companies to mandate fewer board roles.

Management decision-making

How quickly and appropriately companies respond to the crisis will provide insight into company decision-making processes.

We watch for the companies that get on the front foot and mitigate business risks and those that fail to act quickly with necessary actions. This includes the less obvious interdependency risks.

Brand protection

Customer-centric strategies may come under strain as companies face competing pressures.

It is not clear how much any brand value created by a company’s response will translate into future loyalty.

But it is likely any major mishandlings will create reputational risk.

For example, the extent to which banks relax loan repayments for stressed businesses may have longer-term consequences for future business relationships, particularly in the Small and Medium Enterprise segment.

Unsurprisingly this is an area where we have already seen an industry-wide response, given the reputational strains already faced.

Supply chain

The temporary shutdown of supply routes, significant illness among employees, or pressures placed by panic buying will stretch supply chain management for a range of businesses.

Without careful business continuity planning this can elevate ESG risks.

For example, businesses may need to switch to lesser-known suppliers or sub-contractors that have not been through the adequate screening processes.

This raises the risk of lower-quality goods or failure to meet modern slavery or environmental performance standards.

Together with the recent Australian bushfires, the COVID-19 crisis provides lessons for longer-term issues we know are likely to bring supply chain disruption, such as physical disruption from extreme climate change events, either locally or offshore.

Will this make us do things differently?

There has been some discussion on whether the changed behaviours we are seeing with air travel and videoconferencing will lead to a change in practices once the situation passes.

Most of our meetings with company directors have been easily moved to the virtual world for example.

This will partly depend on how long the situation continues and the experience of users during this time.

In the meantime, it will be interesting to see how smoothly large corporates can continue with business-as-usual.

What’s next

Regnan will continue to factor these and other developments into our analysis during this unique time.

We will incorporate these into our company engagement program where material and we will continue to provide further updates on our observations and activities.

As history shows, crises are often associated with new regulation and technological responses along with changes in business and consumer behaviour.

Some of these changes are temporary (eg implementing working-from-home policies or re-tooling production lines to manufacture respirators and masks) while others may be more relevant to ongoing business practices (eg team-orientated communication tools or infrastructure solutions that provide care for elderly members of society – especially in countries with older demographics).

The combination of wide-ranging and rapid change with high uncertainty creates significant challenges – but also investment opportunities.

A disciplined, long-term investment approach focused on anticipating change is key to identifying these investment opportunities and delivering strong risk-adjusted performance.

Pendal’s investment teams have deep experience and insights formed over many market cycles.

Together with Regnan’s ESG analytical capabilities and engagement expertise, we feel confident in continuing to meet client needs despite these uncertain times.

We look forward to providing updates to our clients as this situation progresses.

In the meantime, please do not hesitate to get in touch with your Pendal account manager or learn more about Regnan here.

Investors with well-diversified, well-designed portfolios should stay the course amid the COVID-19 volatility, says Pendal Head of Multi-Asset Michael Blayney.

Michael explains why in this short video. Or read the transcript below.

Transcript

I’m going to provide you here with a brief update on our views on portfolio construction and current market conditions in light of the COVID-19 related volatility we are experiencing.

The first point is it’s always important to maintain a diversified portfolio and there’s multiple ways in which people can diversify their portfolios at a basic level.

It’s having both equities and bonds — but also within equities it’s having a blend of Australian and global equities.

Even though they might move together on a day-to day basis, over an investment time horizon of a balanced investor — which would be five years or more — they can provide substantially different returns over those longer-term time horizons.

In addition, it helps in a portfolio to have some alternative assets and also some foreign currency exposure.

The foreign currency exposure is usually achieved by holding a reasonable proportion of the global equities on an unhedged basis.

In the first part of the recent market correction that we have had, we saw that bonds provided nice diversification to equities with yields falling at the same time that equity markets were falling, resulting in capital gains for government bonds.

In the most recent leg of the market sell-off, we have, however, seen bonds and equities providing negative returns at the same time.

Now the key thing about portfolio diversifiers is they don’t necessarily always diversify in every market condition, so it’s important to have more of them.

And that’s why, for example, foreign currency has been extremely valuable — because the Australian dollar has continued to depreciate and this has helped to cushion the portfolio.

In addition, alternative assets can provide a degree of portfolio diversification as well.

We’ve seen mixed performance from alternative assets in the large selloff that we’ve had. However, even when negative returns have been achieved by the alternative assets, they have generally been better than equities.

So if you put together a portfolio of equities, bonds, alternatives and some foreign currency, that has smoothed the path of returns — even if they’re still negative for an investor.

Spreads on corporate bonds

We also note that in the current environment spreads on corporate bonds — which are essentially the excess yield that a corporate needs to pay to borrow in excess of the government — have widened quite a lot.

We now have spreads in investment-grade bonds, if you look at the US corporate index, of approximately 285 basis points. High-yield spreads also widened considerably.

If we look at the long history of investment-grade bonds, even through world wars, depressions, recessions and financial crises, default rates on investment-grade bonds tend to be very, very low.

So the spread that you get on investment-grade bonds is largely compensating you for what your liquidity is.

That’s a big part of the reason why spreads have blown out so much now.

While we may see some defaults come through, particularly in the energy and leisure sectors, the current buffer on offer on investment-grade bonds well and truly compensates for even an adverse default cycle.

If we were to, however, look at high-yield bonds, the default cycles there can be significantly worse.

And if we see significant defaults on energy, which represents a reasonable proportion of the high yield market, then the current spreads on offer might not be sufficient to compensate for that.

So we’d prefer investment-grade exposure in this environment.

Long-term valuations

While earnings and dividends will take a hit, the current market reaction has exceeded where we believe the impact on long-term valuations should be.

We think it’s probably about about double that impact.

Of course coming into this some markets were very expensive, for example the US. Whereas a lot of the Asian markets were already actually reasonably undervalued.

So some of those markets do represent extremely good value in the current market environment.

In addition, once the crisis eases somewhat and investors start to look around for ways in which they can generate returns on their assets, a quarter of a per cent official cash rate would most likely not be a particularly attractive return.

Even though we are likely to see dividends get cut on shares, the dividend yield on shares is likely to be significantly better than that very low cash rate.

Yields on corporate bonds — in particular investment-grade given those blowouts and spreads — are also likely to become attractive to investers again.

As a result, we believe that in this environment investors should stay diversified, increase exposure where appropriate to particular circumstances of a portfolio, and very much stay the course and do not panic.

We know that while it’s impossible for anyone to predict the exact bottom of a share market, if people do bail out after very large falls, that tends to be quite destructive to long-term wealth.

We know it’s far better to stay the course with a well-diversified and well-designed investment strategy.

A quick overview of government COVID-19 responses from Pendal Head of Bond, Income and Defensive Strategies Vimal Gor.

Watch this short video recorded at Vimal’s home office, or read the transcript below.

TRANSCRIPT:

I’ve spoken at length over the last few months about the situation we’re finding ourselves in, in terms of markets and economics.

The bottom line is — the world economy was slowing and was susceptible to an exogenous shock that would slow us further.

Unfortunately, we’ve seen one of those.

The problem is, there’s no real precedent to the shock we’re seeing. Most crises we’ve seen over the last 100 years have been financial crises which have gone on to affect the broader economies.

If you look at the GFC, it was a housing sub-prime problem which caused a run on financial assets, which then fed into main street.

This one is very, very different. This is a health crisis which is affecting the economic growth patterns of so many economies, which are then feeding into the financial sector.

That’s why it’s very difficult to monitor and model and get an understanding where it might go in the future.

There’s no good time for a pandemic such as this to hit economies — but arguably this is one of the worst times you could have imagined.

The world economy was already beginning to slow — and that was on the back of three reasons.

Firstly, our strong belief is the Fed had over-tightened at the end of the last cycle and hiked rates materially more than they needed to.

Secondly, the de-leveraging we’ve been seeing out of China.

And thirdly the trade tariffs and the trade wars we’ve been seeing which is slowing global growth.

All of this comes at a time when there’s been significant monetary stimulus across the world, which has pushed risk assets up to unsustainable levels.

As the true impact of the pandemic comes through in economic data this has caused monetary authorities to respond as quickly as they can.

Unfortunately there was limited room for them to do so, because interest rates across the world are pretty much at zero anyway.

We have seen what they can do — as the RBA and other central banks across the world have slashed rates to zero and committed to leave them there for a prolonged period.

But the focus has to be on fiscal authorities — and we’ve seen massive fiscal responses across the world already.

We’ve seen huge packages out of Australia and the UK and the US — but we still believe these packages will continue in size and will get to near unimaginable levels, maybe 20% of GDP or north.

This is effectively the role of governments. Governments have to back-stop the economy and back-stop people’s livelihoods.

This is what we’re seeing in the UK —where they are effectively paying people’s wages for those who can’t go to work.

When you have to make a choice as a government between stopping the economy or saving people’s lives, there is only one choice.

You have to save the lives as quickly as you can and then do everything you can to try and help the economy through the situation.

And that’s what every government in the world is trying to do right now.

This is not the time to panic about your portfolios. This is a time to trust in your managers.

This is why you invest with us, and this is the period we’re supposed to help you and work for you.

Whether you’re clients or not, if there’s anything that me or anyone at Pendal Group can do to help you or your business in these troubling times, please do not hesitate to get in contact.

RESERVE Bank Governor Phil Lowe may be cautious by nature but he can recognise when decisive action is required.

The RBA has today delivered a rate cut to 0.25%.

Exchange Settlement balances interest (what the RBA pays for cash parked with them) should have been 0% (25 below) but is now set at 0.1%.

More importantly, in the Quantitative Easing (QE) arena the RBA is targeting 25bp for Government 3-year bonds.

Technically the money will come back to the RBA so it’s not Modern Monetary Theory. And it’s price, not quantity-targeted — so not Quantitative. But effectively it’s QE.

The RBA will be in the market buying government securities as long as the 3-year rate is above 25bp.

They will focus on Commonwealth Government Loans around three years while also leaving the option open for longer.

They’ll also be buying semi-government bonds.

The market was at 50bp going in and is still marked at 35bp.

It is priced-based but they are not open to any volume any day. They will keep going at their own pace as long as the 3-year rate is higher than 25bp.

There should be a big one to start tomorrow.

The RBA also announced a Term Funding Facility – 3-year funding to Authorised Deposit Taking Institutions (ADIs).

This is a good step although it does not solve the problem of banks extending credit to businesses. (That solution is likely to be fiscal).

My thoughts 

This is massive Quantitative Easing.

It will solve Government Bond liquidity and to a lesser extent semi-government liquidity. 3-years will be anchored around 0.25bp. Long-end should still be captive to global moves but panic should subside.

Some will complain it’s not enough to solve credit markets and other dislocations, but keep in mind this is step one.

There is likely more to follow.

Basically they are flooding liquidity into the system and this will be a big help.

I suspect markets will be slow to appreciate how big this is, but I believe in months to come it will be seen as the first step to stabilisation.

Notice of Termination: Pendal Global Fixed Interest Fund (APIR: RFA0032AU, ARSN: 099 567 558)

We are writing to advise you that the Pendal Global Fixed Interest Fund (Fund) will terminate effective from Thursday, 28 October 2021.

As an investor, you are affected by its termination.

Why is the Fund being terminated?

Given the declining size of the Fund, our ability to manage it in accordance with its investment objective and investment strategy has been impacted. As a result, we also consider that the Fund has little prospect of significant growth in funds under management in the foreseeable future.

Accordingly, we have concluded that it is in the best interests of investors to terminate the Fund, liquidate the assets and return the net proceeds to investors.

How this affects you?

We will terminate the Fund on Thursday, 28 October 2021 and as soon as practicable, we will begin winding up the Fund. The assets remaining in the Fund will be realised and the proceeds distributed to all investors in proportion to their unit holding.

Applications, transfers or withdrawal requests received after 2:00pm (Sydney time) on Wednesday, 27 October 2021 will not be accepted.

What does this mean for you?

The cash proceeds from the termination of the Fund will be paid directly to your nominated bank account on or around Tuesday, 30 November 2021.

If there is a final distribution for the Fund, this will be paid directly to your nominated bank account prior to the cash proceeds from the termination. The details of the final distribution will be included in your December quarterly statement.

You will also receive an annual tax statement following the end of the financial year during July/August 2022.

Questions?  

If you have any questions, please contact our Investor Relations Team during business hours on 1300 346 821.

Notice of Termination: Pendal Enhanced Global Fixed Interest Fund (APIR: WFS0005AU, ARSN: 088 841 972)

We are writing to advise you that the Pendal Global Fixed Interest Fund (Fund) will terminate effective from Thursday, 28 October 2021.

As an investor in the Fund, you are affected by its termination.

Why is the Fund being terminated?

Given the declining size of the Fund, our ability to manage it in accordance with its investment objective and investment strategy has been impacted. As a result, we also consider that the Fund has little prospect of significant growth in funds under management in the foreseeable future.

Accordingly, we have concluded that it is in the best interests of investors to terminate the Fund, liquidate the assets and return the net proceeds to investors.

How this affects you?

We will terminate the Fund on Thursday, 28 October 2021 and as soon as practicable, we will begin winding up the Fund. The assets remaining in the Fund will be realised and the proceeds distributed to all investors in proportion to their unit holding.

Applications, transfers or withdrawal requests received after 2:00pm (Sydney time) on Wednesday, 27 October 2021 will not be accepted.

What does this mean for you?

The cash proceeds from the termination of the Fund will be paid directly to your nominated bank account on or around Tuesday, 30 November 2021.

The termination will result in a final distribution of the net income of the Fund. The details of the final distribution will be included in your December quarterly statement.

You will also receive an annual tax statement following the end of the financial year during July/August 2022.

Questions?  

If you have any questions, please contact our Investor Relations Team during business hours on 1300 346 821.

Important Updates

Pendal Enhanced Credit Fund (APIR: RFA0100AU, ARSN 089 937 815)

Pendal Enhanced Fixed Interest Trust (APIR: WFS0365AU, ARSN 099 765 947)

Pendal Fixed Interest Fund (APIR: RFA0813AU, ARSN 089 939 542)

Pendal Monthly Income Plus Fund (APIR: BTA0318AU, ARSN 137 707 996)

Pendal Sustainable Australian Fixed Interest Fund (APIR: BTA0507AU, ARSN 612 664 730)

Effective 20 March 2020, the buy-sell spread for a number of Pendal funds (the Funds) will increase as set out in the table below:

Table 1: Old and New Buy-Sell Spreads

The buy-sell spread is an additional cost to you and is generally incurred whenever you invest in or withdraw from a Fund. The buy-sell spread is retained by the Fund (it is not a fee paid to us) and represents a contribution to the transaction costs incurred by the Fund such as brokerage and stamp duty, when the Fund is purchasing and selling assets. The buy-sell spread also reflects the market impact of buying and selling the underlying securities in the market. Importantly, the buy-sell spread helps to ensure different unit holders are being treated fairly by attributing the costs of trading securities to those unit holders who are buying and selling units in the Funds.

Due to the impacts of COVID 19, investment markets have experienced substantial increases in volatility and substantially reduced liquidity in some markets, resulting in increases in trading costs in fixed income markets. The increase in the buy-sell spreads is related to substantially reduced market liquidity for Australian issued investment grade securities. This change does not reflect a deterioration in the credit quality of these assets.

Pendal has determined an increase the buy-sell spread for each of the Funds as set out in Table 1 above. The buy spread is payable on application to a Fund. The sell spread is payable on withdrawal from a Fund.

Pendal will continue to monitor market conditions and review and update the buy-sell spread regularly as required. You should therefore review the current buy-sell spread information before making a decision to invest or withdraw from a Fund.

Please refer to our website www.pendalgroup.com and click ‘Products’ for the latest buy-sell spread for each Fund.