Stratton Bell - SGH Enhanced Income Trust

SGH Enhanced Income Trust – Quarterly Update

1st Feb 2024

December 2023 quarter

What were the key performance drivers for the SGH Enhanced Income Trust?

In the December quarter, we had a really positive month, where the trust returned just north of 1.9% and outperformed the benchmark by 0.64%.

There’s a couple of drivers towards this. The first one was the listed hybrids that we have in the portfolio performed exceptionally well during the period.

The second, the fixed rate investments in the fund. What we saw during the period was that  long term bonds actually fell by about 0.6% and that really helped the return for the fixed rate investments.

Now we’re at a period where fixed rates investments are offering a slightly smaller yield versus our floating rate investments, but they do provide certainty and a floor in the trust going forward.

Has the positioning of the Trust changed over the quarter?

The SGH Enhanced Income Trust hasn’t materially changed from the last quarter.

Still, what we see is that, the majority of our investments are in floating rate securities and we are increasing our rate to fixed investments where we do see appropriate returns for that.

At the moment, we still expect the interest rate environment to remain relatively stable for the next 6 to 12 months and the yield to maturity on the portfolio to be around the 7% level, which is where we were last quarter as well.

Why should investors consider the SGH Enhanced Income Trust?

We think that people should seriously consider the SGH Enhanced Income Trust for 3 reasons at least.

The first one is the higher level of interest rates that we have at the moment. Equities are not the only investment class that are worth considering. We are seeing returns in the level of 7% pa, which is extremely strong, especially when you look at it historically.

The second one is if we compare our 7% return per annum versus where banks are paying for term deposits the premium is approximately 2% above what the banks offer. Plus we have no locking period during that time, which is even more fantastic from a liquidity point of view.

The third one is as we continue to be in an uncertain world, these fixed rate and floating rate investments have been incredibly secure through a long period of time and across most economic cycles.


The text has been edited for clarity.

The document contains general information only. Reference to either individual securities or other investments should not be considered as investment advice. We strongly encourage you to obtain professional advice before making an investment in securities that have been mentioned. Documents you should consider prior to making an investment could include the relevant Product Disclosure Statement and the accompanying Target Market Determination. If you would like further information on financial products that SG Hiscock & Company Ltd (AFSL 240679) is the investment manager for, contact the Client Services team on 1300 133 451, visit the website or contact your financial adviser.  Any investment is subject to risk, including possible loss of income or capital invested.