This fundie returned 9.33% in 12 months without holding a single equity

Depending on which period you look at, the average long-term return for the ASX 200 hovers between 9% and 10%. And while all asset classes carry risk, it is widely accepted that equities carry more risk than fixed income.
Over the past 12 months, fixed income has enjoyed a halcyon period. But things are changing, and now is the time to avoid potholes, according to Roy Keenan, co-head of fixed income and portfolio manager of the Yarra Enhanced Income Fund.
For Keenan, the last quarter of 2023 was a “fantastic period” in which there were higher rates, expectations the RBA would cut aggressively, and credit spreads were quite wide.
As we all know, interest rate expectations have changed, and Yarra’s house view is that we will see one rate cut this year, in November, followed by another rate cut in 2025, “but it’s going to be a shallow rate cut cycle”, says Keenan.
So, how is he seeing the opportunity set right now?
“We think IG credit is offering good returns at the moment, but it also feels like a market where you want to be avoiding potholes", says Keenan.
The last 12 months to two years have been a really good investing period, but we are conscious of not making mistakes in the current market”, says Keenan.
Those potholes include any company that is leveraged up and has significant exposure to higher interest rates, add Keenan.