Elstree Investment Management Limited

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Elstree Enhanced Income Fund July 2022 Performance Review and Market Commentary


The Elstree Enhanced Income Fund's Net Asset Value (NAV) at the close of business on 29 July 2022 was $0.8424. This compares with the ex-distribution NAV of a unit at the close of business on 30 June 2022 of $0.8277. The change in NAV over the period 30 June 2022 to the close of business on 29 July 2022 represents a return of 1.78%. This compares with the All Ordinaries Accumulation Index return of 6.34% and the All Maturities Bond Index return of 3.36%. Please note the () denotes negative return outcomes.

The Fund's over the year net return (after fees but before adjusting for franking credits) increased to 1.35% from (0.80%) previously.

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Research note: 'Why an allocation to floating rate credit makes sense'.


To download a copy of our research note entitled 'Why an allocation to floating rate credit (aka hybrids) makes sense Click Here and follow the prompts.

In our note we examine the correlation between equity and hybrid sector returns and fixed rate bond and hybrid sector returns. We found, not surprisingly, that hybrid returns were uncorrelated to both. While hybrid and fixed rate bond returns are uncorrelated the returns are even more uncorrelated when fixed rate bonds experience a negative return period. This is particularly pertinent if you expect bond yields to rise (prices to fall) from their current levels of just below 4%.

The correlation between equities and hybrids is not as clear cut. The correlation to equities is low except during event shocks such as a GFC type event when the correlation is extremely high. From the equity portfolio perspective the benefit of making an allocation to hybrids is dependent upon your view of the frequency of major event shocks such as the GFC.

Not only does making an allocation to floating rate credit make sense from the risk reduction perspective at the total portfolio level but as a standalone investment it makes sense too. In risk adjusted terms it is extremely difficult to see how Australian floating rate credit can under-perform equities. In view of the current margins and the high term structure of interest rates we think Australian floating rate credit has the potential to out-perform equities not just in risk adjusted terms but in absolute terms as well.

ASX listed hybrid market update. A perspective on recent market weakness: May 2022


With the ASX listed hybrid market being a bit weaker over the June Quarter 2022 we thought we would provide some perspective. In providing perspective we use the old chestnut of the excess return earned over the risk free rate to help us.

To read our thoughts in more detail please Click here

Research note: 'Measuring tail risk'


To download a copy of our latest research note on quantifying the tail risk of credit protfolios click on the Research Contents page and follow the prompts.

The background is that we wanted to see how the Australian hybrid market would behave if an event shock of the magnitude of the GFC were to be repeated. What we found was that due to structural changes in volatility the market would behave quite differently. We attribute this to the improved credit quality of the sector since the GFC and a raft of factors relating to the deinstitutionalisation, broadening and deleveraging of the investor base.

We were one of the first fund managers to use value at risk or VaR to measure market risk. It is a similar methodology we use to calculate the tail risk of our portfolios.

Elstree on youtube


To follow Campbell Dawson's thoughts on the lastest corporate hybrid security issuance on youtube click on the Research Contents page and follow the prompts.

Elstree in the press


To view our thoughts on global bond market liquidity in an article entitled 'The bond market's liquidity problem' in the the Australian Financial Review (AFR) on Saturday 13 June 2015 click on the link below.

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Bank dividends - will they or won't they?


Will the banks continue to pay dividends on their ordinary shares or will they stop paying them and what are the implications for investors in hybrid capital instruments? There has been much said and written about this lately and we couldn't let the opportunity pass without comment.

We invite you to click on the link below to read our thoughts in more detail.

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Inflation siren sings. Be careful what you wish for.


We've read about it in the press, we've read about it in blogs and we've read about it in broker research notes. We are of course talking about inflation.

While we don't think an outbreak is imminent we understand that policy makers might have a secret ambivalence to manufacture some because of what it does to debt to GDP ratios. We suggest that manufacturing above trend inflation for a period might not be such a good idea given what it did to real returns and markets in the 1970's. 

We welcome any comments you may have.

To read the note simply click on the link below.
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Latest research note June 2022: Back to the Future: Remembering 1994.


To read our latest research note entitled 'Back to the Future: Remembering 1994' please
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Our Funds

Elstree Hybrid Fund (Cboe code 'EHF1')


Additional information about the Elstree Hybrid Fund (Cboe code 'EHF1') can be found by clicking here.

For information regarding the Fund's Dividend Reinvestment Plan (DRP) please Click here

The Elstree Hybrid Fund's latest Fact Sheet can be found by clicking here


Elstree Enhanced Income Fund NAV

Latest: 9 August 2022 $0.8433.

Previous: 2 August 2022 $0.8439.

Previous month end: 29 July 2022 $0.8424.

Find Out More

To view the latest Monthly Review Click here

To download the Elstree Enhanced Income Fund's NAV and Cash Distribution history updated on 6 April 2022. Click here


Latest Fact Sheet: Updated May 2022

Elstree Enhanced Income Fund. To view the latest Fact Sheet Click here

Latest Research Note June 2022. Back to the Future: Remembering 1994.


To read our latest research note entitled 'Back to the Future: Remembering 1994' please
Click here

Will they or won't they cut bank dividends?


Will the banks continue to pay dividends on their ordinary shares or will they stop paying them and what are the implications for investors in hybrid capital instruments?

There has been much said and written about this lately and we couldn't let the opportunity pass without comment. 

To view our thoughts in more detail Click here

Inflation siren songs. Be careful what you wish for.


We've read about it in the press, we've read about it in blogs and we've read about it in broker research notes. We are of course talking about inflation.

While we don't think an outbreak is imminent we understand that policy makers might have a secret ambivalence to manufacture some because of what it does to debt to GDP ratios. We suggest that (perhaps) manufacturing above trend inflation for a period might not be such a good idea given what it did to real returns and markets in the 1970's.

To read our thoughts in more detail please
Click here

Elstree Enhanced Income Fund achieves 5* Morningstar quantitative rating

Click here for details.

How do hybrids perform in periods of stress.


To read our thoughts in more detail please
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Elstree Hybrid Fund (Cboe Code 'EHF1) July 2022 Review


To read the latest performance review and market commentary for the Elstree Hybrid Fund (Cboe Code EHF1)
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Latest Research Note: Another Australian World Record Holder?


To read the latest Research Note entitled, 'Another Australian World Record Holder'
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