Page 1 - Private Wealth Specialist Income (Moderate, Assertive and Balanced) PDF Factsheet

SMA Portfolio Change

Specialist Income SMA (Moderate, Assertive & Balanced portfolios)

Hybrid redeemed and replaced - MQGPC

As at 15 January 2024

Hybrid securities typically have maturity dates where they can be converted to a different asset
class or redeemed. The hybrid security – Macquarie Group Capital Notes 3 (MQGPC)
investment within the Specialist Income portfolios has been redeemed and needs to be
replaced with another investment.

Redeemed:

On 16 December 2024, Macquarie Group Capital Notes 3 (MQGPC) reached its first call date
and was redeemed by Macquarie Group. Each unit was redeemed for a par value of $100,
along with a final distribution of $1.8246.

Purchased:

Historically we have replaced matured hybrids with another hybrid option. Hybrid spreads have
tightened to low levels. Despite the attractive current yield, hybrids currently look expensive
relative to the risk they carry to other fixed income and bond options. We’re also conscious of
changing liquidity conditions in this part of the market and the impact trading may have on
returns. For this reason, have replaced MQGPC with the VanEck Australian Subordinated Debt
ETF (SUBD). SUBD is already owned in your portfolio, so this purchase increases the existing
allocation.

Description:

SUBD is an ETF which invests in a portfolio of subordinated bonds, with the aim of providing
investment returns before fees and other costs that track the performance of the iBoxx AUD
Investment Grade Subordinated Debt Mid Price Index. This provides investors with exposure
to a portfolio of regulatory Tier 2 Capital investment grade credit subordinated floating rate
bonds. These are similar to hybrid securities, but are higher ranking in the issuer’s corporate
structure. The portfolio only includes AUD denominated floating rate bonds issued by
financial institutions including banks, insurers and professional and commercial services.