The eInvest Cash Booster Fund (‘the Fund’ or Ticker: ECAS)

eInvest Cash Booster Fund (‘the Fund’ or Ticker: ECAS) is an Exchange Traded Fund (ETF)
that listed on 11 November 2019. It is very low risk, return Australian debt and term deposits
(TDs) mandate managed by Daintree Capital Management Pty Limited (the ‘Manager’ or
‘Daintree’), a Sydney based boutique fixed income specialist founded in 2017 as a 50/50
joint venture (JV) with PVM Capital Partners Ltd (Perennial)). The Fund targets an annualised
return of RBA Cash + 50-75 basis points (bps) after fees with consistent monthly income
while trying to minimize volatility, negative performance months and drawdowns. ECAS is
designed to be an alternative to TDs, with the additional benefit of daily liquidity. ECAS is a
newly formed investment strategy with existing track-record, but IIR notes the Manager has
successfully managed the Daintree Core Income Trust and the Daintree High Income Trust
since July 2017 and November 2018, respectively. The Manager utilises a bottom up, top
down investment strategy that is flexible and market driven opportunistic, with the Manager
seeking the most attractive relative value opportunities and to do so with the lowest degree
of credit, duration, and illiquidity risk to achieve the stated returns target. That said, given the
low risk-return nature of the Fund and expectation of the underlying portfolio comprising the
upper tier on investment grade debt securities and a material allocation to TDs, there will be
natural limits to the degree to which manager skill can add value. While Daintree is relatively
newly formed, the founding partners, Mark Mitchell and Justin Tyler, are experienced fixed
income industry veterans.
INVESTOR SUITABILITY
ECAS should be viewed strictly as a term deposit alternative, with the benefit of daily
liquidity, and the potential for a marginal degree of enhanced income over prevailing TD
rates. The real benefit for investors relative to TDs is the daily liquidity and ease in investing
by way of the ETF structure. On account of both, ECAS may represent a suitable strategic
asset allocation option for investors seeking to either temporarily or indefinitely partly
reallocate out of riskier asset classes. While ECAS represents a new investment strategy,
IIR notes that over the Daintree Core Income Trust’s two year track-record, the Manager’s
risk-return objectives have been achieved. Furthermore, during this period, there have been
no negative monthly periods, including during the investment grade credit spread widening
events from March to June 2018 and November and December 2018. Monthly distributions
have been smooth and consistent. In a peer group analysis, the Trust has outperformed in
every important measure (returns, risk, negative months). In short, IIR has a high degree of
confidence in the Manager achieving the investment objectives for ECAS, notwithstanding
the investment strategy’s absence of a track-record.
RECOMMENDATION
IIR ascribes a “RECOMMENDED” rating to the Fund. Daintree, while having a short track
record as an entity, represents an experienced investment team led by its two industry
veteran portfolio managers (PMs), Mark Mitchell and Justin Tyler. While the boutique manager
may not have the resources of larger investment managers, the Manager plays to its relative
strengths and has developed internally robust processes and systems. While less relevant to
ECAS than the Manager’s other two higher risk-return investment strategies, IIR believes, in
particular, its ability to manage the ever increasing downside risks in the traded debt markets
sets it apart from many other comparable mandates available to domestic investors. We
also believe its flexible, market driven opportunistic investment strategy is best suited to the
current market environment, the key dynamics of which (low yields, heighten volatility and
tail risks, material long duration risk) IIR believes will persist for the foreseeable future. In
short, IIR believes ECAS represents a sound investment option for its stated and intended
use as a daily liquid TD alternative.