What is the objective of the High Income Portfolio?
The High Income Portfolio aims to provide regular income through investing in a diversified and actively managed portfolio of quality fixed interest investments.
We aim to provide an income return that is greater than bank term deposits by generally favouring fixed interest investments that deliver higher returns at an acceptable level of risk. However, with the higher rate of expected return comes higher expected risk, including the risk of capital loss.
What are Fixed Interest Investments?
Fixed interest investments, such as term deposits and government bonds offer investors a regular income for a specified term with the expectation that the principal will be repaid at the end of the term (maturity date).
Term Deposits are a deposit with a financial institution which has an agreed term (generally 1 month to 5 years) and interest rate (generally higher than an at call account but lower than other fixed interest investments). There are restrictions on how they can be terminated prior to the term. The chief benefit of a term deposit is that capital is guaranteed by the Australian Government, up to a limit of $250,000.
Bonds are securities issued by Governments or Corporations when they borrow money from investors.
Corporate Bonds generally pay a higher rate of return than Government Bonds and usually pay higher interest than term deposits to reflect the perceived higher credit risk.
Global bonds are usually fully hedged to the Australian dollar to remove any currency risk.
Residential Backed Mortgage Securities (RMBS) are another form of fixed interest investment and are made up of packages of home loans that are sold on by lenders to investors.
RMBS generally pay higher returns than Government Bonds and in some cases Corporate Bonds due to increased credit risk.
Fixed interest investments can be sold relatively quickly, although it’s important to note their capital value may rise and fall due to market conditions and assessed credit risk.
What are the benefits of investing in the High Income Portfolio?
Quarterly income distributions; we are targeting a distribution of over 3% p.a, (net of all fees) and paid quarterly – please note that this rate of return is not guaranteed and is determined by market conditions.
Actively managed; we utilise a range of specialist Fixed Interest Managers to take advantage of expertise in both local and global fixed Interest markets and monitor the underlying portfolios and manager performance so as to minimise risk of any capital loss.
Diversification; our portfolio is diversified in two crucial ways: first, it offers diversification across Government and Corporate Bonds as well as RMBS and other liquid fixed interest opportunities both in Australia and Internationally. Second, we select different Fixed Interest Managers to take advantage of their expertise across different markets.
Easy access; it’s a quick and simple process to open an account and you can start with as little as $5,000.
Regular updates; Our Investment Committee provides you with regular and timely updates on the performance of the portfolio
What are the risks of investing in the High Income Portfolio?
Whilst the High Income Portfolio aims to minimise risk of any capital loss by diversifying both across the various types of fixed interest investments and within those categories, an investment in the portfolio is not capital guaranteed. There is a risk of capital loss and/or of the portfolio not being able to pay the expected income distribution.
Who might be suited to the High Income Portfolio?
Investors and retirees seeking a higher rate of income return than is currently being offered by bank deposits and who fully understand and accept that this investment is higher risk than a term deposit. In particular, unlike an investment in a term deposit, an investment in our High Income portfolio is not capital guaranteed.
What is the minimum investment?
The minimum investment is $5,000, with the ability to add further amounts of $1,000 or more.
How often are income distributions paid?
Income distributions (which consist of interest and realised capital gains) are paid quarterly around the following dates: January 30, April 30, July 30 and October 30.
Can I elect to reinvest my income back into the portfolio?
Yes. When opening your account, you can choose what percentage of the income (from 0% to 100%) you wish to receive, and the balance will be reinvested back into the portfolio. Alternatively, you can elect to receive a fixed amount quarterly which may consist of income and capital, which will be transferred into your nominated bank account every quarter.
Is my money locked in for a certain time?
No. You can withdraw your money at any time without penalty. Settlement usually takes 7 days although in certain circumstances we reserve the right to extend this period (reasons in which we might have to do so this are set out in the PDS). The majority of the funds we invest in are listed on the ASX which settle on a T+2 basis although a portion is likely to be unlisted which will generally take longer to settle.
What are the costs involved?
We charge a Management Fee of 0.75% p.a. which covers our investment management decisions as well as the platform administration costs. This fee is deducted directly from your account on a monthly basis.
There is also an indirect cost based on the underlying charges of the holdings we invest in, such as ETFs and managed funds. These charges are automatically deducted from those funds and do not come out of your account.
For an estimate of your monthly charges please click here.
Who makes my investment decisions?
The Collins House Investment Committee manages the portfolio. The Investment Committee has over 60 years experience in financial markets and portfolio construction. Click here for further information.
The selection of the individual fixed interest securities is outsourced to external investment managers who have significant experience and expertise in managing fixed interest securities.
How is my first quarterly income payment calculated?
A new investor entering the High Income Portfolio during the quarter will have their accrued income paid out to them based on the time they have been invested in the portfolio. As an example, if you enter the portfolio 20 days before we pay income out for that quarter, then you will only be entitled to any interest, dividend or distributions paid by the underlying funds or ETFs for the quarter, in that 20 day period in which you were invested.