Low-risk way to return

THE manager of an absolute return fixed income fund that targets a return slightly over the cash deposit rate has told a group of Geelong financial advisers how it had not had a negative quarter in 11 years.

The Kapstream Absolute Return Income Fund aims to generate stable and consistent income while preserving capital and minimising downside loss.

In Geelong on Wednesday, Kapstream managing director Raymond Lee said it was important for investors to have a portion of their portfolio in defensive assets to manage volatility, but cash did not generate much income.

Kapstream’s advice is to have a portion of the cash bucket in its lower-risk fixed income fund that targets a return of 2 to 3 per cent above the cash deposit rate.

“We are not trying to hit the ball out of the park, we are trying to earn a return over cash; a lot of people use us as part of their enhanced cash strategy,” Mr Lee said.

He said the fund had experienced only nine negative months in the past 130 and had positive quarters every quarter in that time.

The Kapstream Absolute Return Income Fund invests predominantly in highly rated — investment grade — companies.

This lower-risk, highly diversified approach means that while returns may be modest, generally they are consistent and capital is preserved.