AFM Fund Review
Kapstream Absolute Return Income Fund
31 March 2024

Key Facts

Index Used:	Bloomberg AusBond Composite 0+ Yr Index	Discretionary/Quantitative:	Discretionary
Peer Group:	Fixed Income - Bonds	FUM (millions):	AU$ 1,367.76m
Investment Style:	N/A	Fund Inception Date:	May 2007
Geographic Mandate:	Global	Latest Return Date:	March 2024
Investor Type:	Wholesale	Status:	Open
Minimum Investment:	AU$ 10,000	Investment Frequency:	Daily

Manager Details

Established in late 2006, Kapstream Capital is a global fixed income fund manager providing alternative investment strategies to an increasingly sophisticated market in Australia. By targeting absolute return strategies, Kapstream seeks to maximise returns for clients. The capacity to move in and out of specific sectors and countries within the fixed income universe permits Kapstream to seek areas that are priced for greater return potential and opportunistically identify relative value trades. This key differentiating factor gives Kapstream flexibility in managing portfolios and allows it to capture what Kapstream considers to be among the best investment ideas.

Strategy Description

Kapstream will actively manage the Fund and aims to generate absolute returns over multiple business cycles by incorporating high quality/high conviction trades into the portfolio. Capital preservation coupled with income generation serve as the driving force behind Kapstream's investment strategy.

Kapstream draws on information from many sources such as economic roundtables, investment banks, brokers, rating agencies and central banks. Kapstream employs a rigorous evaluation process for individual trades, first confirming that a prospective trade meets Kapstream's global macroeconomic view, then taking account of various decision variables such as duration, yield curve and volatility which must support the research and analysis.

Fund Fees

Management Fee:	0.55%	Performance Fee:	0%
Buy Spread:	0%	Sell spread:	0%
High Water Mark:		Hurdle:	N/A

Fund Structure

Offshore/Onshore:	Onshore	Fund Structure:	Unit Trust
Share Classes:	AU$	Trustee/RE:	Fidante Partners
Administrator:	Challenger	Prime Broker:	N/A
Custodian:	JP Morgan	Legal:	Challenger

Ratings & Availability

Research Ratings

None.

Platform Availability

No Data.

Performance Review

The Kapstream Absolute Return Income Fund has a track record of 16 years and 10 months and has underperformed the Bloomberg AusBond Composite 0+ Yr benchmark since inception in June 2007, providing investors with an annualised return of 3.96% compared with the benchmark's return of 4.24% over the same period.

The Manager has delivered these returns with 2.7% less volatility than the benchmark, contributing to a Sharpe ratio which has fallen below 1 four times over the past five years and which currently sits at 1.08 since inception. The fund has provided positive monthly returns 91% of the time in rising markets and 80% of the time during periods of market decline, contributing to an up-capture ratio since inception of 28% and a down-capture ratio of -30%.

The Kapstream Absolute Return Income Fund rose by +0.54% in March, a difference of -0.58% compared with the Bloomberg AusBond Composite 0+ Yr benchmark which rose by +1.12%. Over the past 12 months, the fund's best monthly return was +0.91% compared with the benchmark's best return of +3.01%, and its worst monthly return was +0.03% vs the benchmark's worst return over the same period of -1.95%.

Year	Jan %	Feb %	Mar %	Apr %	May %	Jun %	Jul %	Aug %	Sep %	Oct %	Nov %	Dec %	YTD %
2024	0.54	0.03	0.54	NA	NA	NA	NA	NA	NA	NA	NA	NA	1.11
2023	0.45	0.64	0.18	0.39	0.27	0.10	0.63	0.58	0.29	0.53	0.63	0.91	5.74
2022	0.03	-0.12	-0.43	-0.19	-0.21	-0.23	-0.21	0.25	-0.19	-0.05	0.21	0.59	-0.55
2021	0.10	-0.16	-0.11	0.11	0.07	-0.01	0.23	0.01	0.01	-0.16	-0.19	0.12	0.03
2020	0.62	0.46	-2.59	0.29	0.35	0.47	0.65	0.11	0.22	0.28	0.52	0.17	1.51
2019	0.31	0.38	0.64	0.37	0.41	0.32	0.43	0.30	-0.07	0.08	0.18	0.07	3.47
2018	0.37	0.28	-0.09	0.17	0.14	0.16	0.20	0.34	0.12	0.27	-0.04	0.10	2.03
2017	0.35	0.48	0.38	0.15	0.36	0.15	0.32	0.24	0.20	0.44	0.27	0.16	3.55
2016	0.32	-0.11	0.48	0.44	0.45	0.21	0.40	0.55	0.20	0.03	-0.07	0.07	3.02
2015	0.54	0.36	0.45	0.05	0.21	-0.17	0.31	-0.02	0.10	0.31	0.14	0.10	2.40
2014	0.56	0.49	0.34	0.44	0.43	0.39	0.31	0.30	0.27	0.19	0.41	0.50	4.73
2013	0.46	0.39	0.31	0.61	0.36	-0.47	0.68	0.26	0.42	0.38	0.38	0.28	4.13
2012	0.56	0.79	0.66	0.50	0.50	0.38	0.74	0.78	0.88	0.95	0.59	0.59	8.21
2011	0.57	0.53	0.46	0.63	0.61	0.11	0.70	0.06	0.13	0.57	0.05	0.53	5.06
2010	0.79	0.55	0.50	0.49	0.25	0.39	0.57	0.71	0.31	0.57	0.33	0.37	5.99
2009	0.91	0.45	-0.17	0.70	0.61	0.89	0.84	0.61	0.54	0.63	0.65	0.31	7.19
2008	0.55	0.34	0.40	0.73	0.53	0.26	1.00	0.85	-0.18	1.18	0.74	0.43	7.04
2007	NA	NA	NA	NA	NA	0.35	0.05	0.51	0.52	0.58	-0.18	0.56	2.41

Only seven years of data shown. Click here to view all data.

General Notes

Minimum investment, management and performance fee terms apply to institutional investors only.

Annual Returns

Over the past 12 months, the fund has risen by +5.56% compared with the benchmark which has returned +1.47%, for a difference of +4.09%. Since inception in June 2007, the fund has returned +3.96% per annum, a difference of -0.28% relative to the benchmark which has returned +4.24% on an annualised basis over the same period.

Cumulative Returns

On a cumulative basis (assuming reinvestment of distributions), $100 invested since inception would have become $192. The same amount invested in the benchmark over the same period would have become $201.

Annual Returns %

Volatility and Risk

Annual Standard Deviation

The fund's returns over the past 12 months have been achieved with a volatility of 0.83% vs the index's 5.4%. The annualised volatility of the fund's returns since inception in June 2007 is 1.21% vs the index's 3.91%. Over all other periods, the fund's returns have been consistently less volatile than the benchmark.

Sharpe Ratio

The fund's Sharpe ratio has ranged from a high of 1.68 for performance over the most recent 12 months to a low of 0.05 over the latest 36 months, and is 1.08 for performance since inception. By contrast, the Bloomberg AusBond Composite 0+ Yr Index's Sharpe for performance since June 2007 is 0.4.

Annual Standard Deviation

Sharpe Ratio

Performance in Positive Markets

Since inception in June 2007 in the months where the market was positive, the fund has provided positive returns 91% of the time, contributing to an up-capture ratio for returns since inception of 28.22%. Over all other periods, the fund's up-capture ratio has ranged from a high of 49.26% over the most recent 12 months to a low of 18.24% over the latest 36 months.

Performance in Negative Markets

Since inception in June 2007 in the months where the market was negative, the fund has provided positive returns 80% of the time, contributing to a down-capture ratio for returns since inception of -29.64%. Over all other periods, the fund's down-capture ratio has ranged from a high of 0.99% over the most recent 60 months to a low of -18.3% over the latest 12 months. A down-capture ratio less than 100% indicates that, on average, the fund has outperformed in the market's negative months, and a negative down-capture ratio indicates that, on average, the fund delivered positive returns in the months the market fell.

Average Return in +ve Market %

Average Return in -ve Market %

Sortino Ratio

Drawdown

Over the past 12 months, the fund hasn't had any negative monthly returns and therefore hasn't experienced a drawdown. Over the same period, the index's largest drawdown was -5.2%. Since inception in June 2007, the fund's largest drawdown was -2.59% vs the index's maximum drawdown over the same period of -13.2%.

Sortino Ratio

Drawdown%

Fund Index Peer group

Quintile Ranking vs. Average Fixed Income - Bonds as of March 2024

The performance of the Kapstream Absolute Return Income Fund ranked it in the first or second quintile for all KPIs over all time periods.

Over the past 12 months, the fund has risen by +5.56% compared with the peer group which has returned an average of +4.32%, for a difference of +1.24%.

The fund's returns over the past 12 months have been achieved with a volatility of 0.83% vs the peer group's average volatility of 3.17%. The annualised volatility of the fund's returns since inception in June 2007 is 1.21% vs the peer group's 2.78%. Over all other periods, the fund's returns have been consistently less volatile than the peer group.

1 Year

Total Return

Volatility

Sharpe Ratio (S.I.)

Sortino Ratio (S.I.)

Downside Deviation (S.I.)

Largest Drawdown (S.I.)

3 Year

5 Year

7 Year

Kapstream Absolute Return Income Fund

Bloomberg AusBond Composite 0+ Yr Index

Quintile Rankings display Key Performance Indicators (KPI's) against the fund's Peer Group. Each green square ranks the fund in one quintile (or 20%) of its peer group - five green squares indicate the fund is in the best quintile for each KPI. The performance of the peer group's underlying index is shown by a red dot.