June Monthly Newsletter Atlas High Income Property Fund

  • The Atlas High Income Property Fund gained by 0.4% over June in an eventful period which saw Property Trusts raise close to $1.8 billion from investors,  a sure sign that the market is getting fully valued, especially as most of these raisings were done at a premium to net tangible assets per share. Following the investing adage of “Be fearful when others are greedy”,  we were active sellers over the month.
  • The key news in June was the RBA cutting the cash rate to 1.25% which was a historic low and eclipsed previous low of 1.5% from October 1934. For almost a decade, the risk-free interest rate as measured by the Commonwealth Government 10-year bond yield has been relatively stable between 4% and 3%; however, in 2019, the risk-free rate has collapsed halving to 1.25%. This dramatic and unprecedented fall in the interest rate has put downward pressure on the premiums the Fund receives for selling call options. This is due to what in mathematical finance is referred to as the option “Greek” term called rho, which measures the change in the price of the option relative to the risk-free rate.
  • In June we issued a new Product Disclosure statement for the Fund which can be accessed by clicking on this link

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2020.