Consistent income generation is at the heart of everything we do and is fundamental to how we manage risk for both funds. The charts below bring to life how this investment philosophy meaningfully reduces risk for our Global fund, delivering genuine absolute return characteristics alongside a consistent 8% earned income yield.
Wheelhouse Global consistently screens as the lowest risk long-only equity fund across all Global and Australian funds in the Morningstar universe, while still generating a consistent 8% return.
Source: Morningstar Direct
Source: Wheelhouse, post fee returns
Positive Returns During Drawdowns
The absolute return characteristics are evident when reviewing performance during recent major drawdowns.
Stable Unit Price
This lower risk approach is reflected in a very stable unit price across all market shocks, historically trading between $1.00 and $1.10 despite fully funding a near 8% income return.
Income and protection
The Wheelhouse Global Equity Income Fund seeks to deliver a 7-8% real income return, while only assuming around half the market risk (targeted beta of 0.5). This results in consistent absolute return characteristics for Australian investors.
As such, the Global strategy is a risk-minimisation strategy, or a goals-based strategy, where the objective is to reduce risk as much as possible while still achieving a return similar to equities. This approach stands in contrast to most other long-only strategies which are return-maximising and assume full market risk.
In addition to managing a rules-based option overlay, active ‘always-on’ tail protection is used to help defend against capital losses during acute market drawdowns. When combined with the historical defensiveness of the Australian dollar during times of crisis (the fund is unhedged on currency), capital integrity has been meaningfully enhanced during times of crisis.
High yield for minimal risk, or as we like to say, Income and Protection.
Income and Growth
The Wheelhouse Australian Enhanced Income Fund seeks to deliver a 7-8% real income return (including enhanced franking), plus capital growth, while assuming full market risk (targeted beta of 1.0).
In contrast to our Global fund, the Australian fund is a ‘return-maximising’ strategy and designed to deliver outperformance (or alpha) relative to its Benchmark. The investment process is an extension of the Global strategy, with the exception that leverage is utilised to increase targeted market risk.
With consistent risk parity versus the Benchmark, the Australian fund is better placed to deliver on its second investment objective… Income and Growth.