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Fixed Income Solutions

Fixed Income Solutions is an Australian cash and fixed income specialist and a division of BGC Partners, a global financial services company listed on NASDAQ:BGCP.

We currently work with several Aged Care providers on their Investment Management Strategy (IMS) and have been doing so for over 5 years. Our Aged Care provider clients currently have over $160m invested in conservative bond portfolios.

With a mandate under an investment policy framework, we use the professional bond market to create efficient fixed income solutions that generate steady income and provide capital stability while managing credit risk, cashflow and liquidity requirements.

The cash rate is effectively at zero and term deposit rates below 1%. The Reserve Bank of Australia (RBA) is looking to maintain rates at current levels at least until 2024 with the final paragraph of their monetary policy meeting minutes for March 2nd stating:
“The Board remains committed to maintaining highly supportive monetary conditions until its goals are achieved. The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.”

In this environment, we are seeing an increasing demand from clients looking to manage their cash more efficiently to minimise the impact of lower interest rates on their income and budgets.

Using the professional bond market, we work with our clients to build a portfolio of bonds that meet their IMS requirements. The interest payments on the bonds generate a reliable income stream. By incorporating Govt bonds, bank bonds and corporate bonds in a diversified selection of fixed rate, floating rate and inflation indexed bonds you can achieve a higher return than currently offered in the retail deposit market and build some protection against interest rate movements and the impact of inflation.

If you are using a managed cash fund, you would already have some exposure to bonds. However, only by investing direct in a portfolio of bonds do you gain the key benefits that bonds provide including regular interest payments and a fixed maturity date. You have full transparency of your investments and the return you will receive. You are not locked in and can sell at any time with liquidity provided by the size of the global bond market.

If you would like some information on how we work with Aged Care providers on an Investment Management Strategy, please email me at simon.michell@fixedincomesolutions.com or call me on (02)8222 8904.

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