Anadara 

Company Overview

This investment has been designed for investors that believe US Interest Rates will fall over the next 12 months. US inflation has cooled even further and many economists forecasting that the Federal Reserve will cut US interest rates multiple times before the end of 2024.

We trade long bond fund positions for exposure to falling interest rates, as falling interest rates have a significant impact on bond fund Net Asset Values (NAVs) due to the inverse relationship between bond prices and interest rates. When interest rates decline, the prices of existing bonds increase, as they offer comparatively higher yields than newly issued bonds. This is because when interest rates fall, the fixed coupon payments of existing bonds become more attractive compared to new bonds issued at lower rates. Consequently, investors are willing to pay a premium for these higher-yielding bonds in the secondary market, resulting in the market value of the bonds held by these funds rising, leading to a higher NAV for these funds.

PIMCO is a global leader in active fixed interest, with deep expertise across public and private markets managing US$1.8 trillion in assets. PIMCO was established over 50 years ago and yields significant influence in debt markets globally.

The chart above demonstrates the inverse correlation between interest rates and bond funds. Over the last two years while interest rates have been rising, the unit price of one of PIMCOs income funds fell by almost 15% even though it continued paying monthly distributions to investors – this is because investors saw greater value and stability in government issued bonds than income funds.

For investors that share our view that US Interest Rates will fall during the investment term, Anadara has structured an investment that offers 100% leveraged exposure to the PIMCO GIS Income Fund – Class E JPY (Hedged) Accumulation via a tax effective limited recourse loan over 12 months.

Investors have an opportunity to receive two Coupons, a Conditional Coupon* that will be paid if the US Federal Reserve cuts US Official Interest Rates to below 5% in 2024, plus an uncapped Performance Coupon* based on the positive performance of the PIMCO GIS Income Fund JPY (Hedged) Accumulation fund during the investment term.

*Coupons will be adjusted for any changes in the USD/AUD exchange rate.

Australian Tax Office Product Ruling PR 2024/6 has been issued in relation to the Master IM and confirms certain aspects of the tax treatment of an investment under this Term Sheet IM. Learn more HERE