Elstree Investment Management Limited

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Elstree Enhanced Income Fund May 2021 Performance Review and Market Commentary


The Elstree Enhanced Income Fund's Net Asset Value (NAV) at the close of business on 31 May 2021 was $0.8683. This compares with the NAV of a unit at the close of business on 30 April 2021 $0.8663. The change in NAV over the period 30 April 2021 to the close of business on 31 May 2021 represents a return of 0.23%. This compares with the All Ordinaries Accumulation Index and the UBS All Maturities Bond Index returns of 1.96% and 0.27% respectively.

The Fund's over the year net return (after fees but before adjusting for franking credits) decreased to 9.10% from 10.11% 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 April 2020


Investors in hybrid capital instruments will probably shiver when they recall their GFC experience. Even though equity markets are putting in another GFC type performance, the ASX listed hybrid market is far less affected this time around. While our funds have performed well over the period from the beginning of the draw down to the present day we are well positioned to out-perform going forward.

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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Research note March 2014: Welcome to planet Japan


In summary our latest research note entitled 'Welcome to planet Japan' looks at what the developed world might look like if it continues down the Japanese path of zero interest rates, weak investment and output growth and benign price pressures.

Coined by Larry Summers as 'secular stagnation' the outcome is not a particularly bright one for equity markets. If the Japanese experience is any indication the outcome is somewhat brighter for credit markets as spreads contract amid a decline in default rates.

To read the note simply click on the link below.
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Our Funds

Elstree Hybrid Fund lists on Chi-X.


Elstree Investment Management Limited is pleased to announce the listing on 31 March 2021 of the Elstree Hybrid Fund. The Fund is listed on the Chi-X exchange. The Fund trades under the code EHF1.

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


Elstree Enhanced Income Fund NAV

Latest: 15 June 2021 $0.8655.
Previous:9 June 2021 $0.8666.

Previous month end: COB 31 May 2021 $0.8683.

Find Out More

To view the latest Monthly Review Click here

To download the Elstree Enhanced Income Fund's NAV history updated on 16 April 2021. Click here


Latest Fact Sheet: Updated January 2021

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