Coffee Catch-Up Meet Adam Juillerat
Read excerpts from our Q&A below:
Hi Adam! Thanks for taking the time out for this interview. We don’t want to take too much of your time, so let’s dive right in and get started with a little bit about your career.
1.Talk us through your career path up till now? Did you always see yourself landing in Fixed Income?
I’ve always had a passion for markets. Whilst at university, I assisted in establishing a student-run trading and investment club. We ran workshops, developed trade ideas, and brought in market professionals to present to us and our members. My first professional role was in fixed income at a bond broking firm. I worked alongside the sales, portfolio management and credit strategy teams, which provided me with a broad range of experiences to learn from. It was not exactly where I saw myself starting; however, I wouldn’t change a thing.
2. Tell us about your current role at IAM? What kind of clients do you service?
There is a significant educational component which comes with the role, which I enjoy. Australian investors typically hold cash on one end of the risk spectrum and equity and property on the other. As a result, most investors have unknowingly adopted a barbell approach with their asset allocation. Since the cash rate has increased from 0.1% in May 2022 to 4.10%, yields on investment-grade bonds have risen sharply.
The yield on the AusBond Credit Index (an investment grade index comprised of Government and corporate bonds) is 5.09%, compared to the indicative dividend yield for the S&P/ASX 200 of 4.47%. Therefore, Australian-denominated bonds provide greater returns but with considerably lower risk.
I service clients across the not-for-profit, advised and self-directed market sectors. I enjoy providing each type of investor with education where required and expertise in building portfolios based on their specific risk preferences.
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Speaking of fixed income, let’s look at some of your expertise at work:
3. Within the current climate there is a renewed focus on the value bonds can deliver to portfolios. What would you say are some of the misconceptions people have towards bond investing and what are your thoughts on that?
Two common misconceptions I encounter are that bond prices perform poorly in rising-rate environments and are purely buy-and-hold investments. Whilst investors/commentators are correct in saying that long-dated, fixed-rated bonds (such as Australian Commonwealth Government Bonds) underperform during rising rate environments, floating rate notes have greater insulation to price movements as their income is based on a floating benchmark (the Bank Bill Swap Rate, which closely tracks the cash rate).
Therefore, there are benefits to understanding this dynamic and actively managing portfolios to position them according to the interest rate cycle.
By delving into the return profile of the IAM Wholesale Model Portfolio, run by Head of Credit Strategy Matt Macreadie, we can view benefits in active management over the cycle. Whilst the benchmark Ausbond Credit Index (BACR0) has returned 2.25% in the six months leading up to June 30, the IAM Wholesale Model Portfolio doubled that return for the same period. Matt currently has allocated a 70% fixed, 30% floating balance in the portfolio, highlighting where he views the rates cycle.
4. What is your personal investment mantra?
Capital preservation is critical – having a portion of your portfolio earning a stable income provides you with the comfort to take calculated risks in your equity and property allocations. Always ensure your cash is working for you, not against you – so it pays to be aware of actual returns adjusted for inflation.
And finally, we’d like to get to know a bit more about you outside of work.
5. We hear you’re currently moving from Brisbane to Sydney, what’s brought about the move to “the big smoke”?
Sydney has a lot to offer newcomers, and as someone who was ‘born and raised’ in Brisbane, I look forward to the prospect of building new networks and friends in Australia’s Harbour City. Whether exploring various parts of the city, discovering out-of-town weekend hotspots, or checking out some of the stadiums and rugby league on offer, I imagine I’ll have plenty to do during both work hours and off-duty. I’ll be basing myself out of Paddington for the first year and already have several Strava running routes saved down and restaurants/bars to visit.
I look forward to working alongside my NSW-based colleagues and continuing to build my career – I also look forward to the gloating rights in September after the mighty Brisbane Broncos take out the 2023 Premiership! (Hoping this comment ages well).
6. What are a few of the things you’ll miss the most about Brisbane?
Brisbane is a fantastic city and has some exciting developments ahead of it over the next decade. The growing bar and restaurant scene is one that I have thoroughly enjoyed – one of my favourite areas is the James Street precinct which is one of Brisbane’s key retail and dining destinations. Every July, the annual ‘James Street Festival’ is hosted – I’ll certainly be back to make an appearance for that at next year’s event.
Alongside proximity to some of the world’s best beaches, Brisbane also boasts over 30km of riverside footpath – as an avid runner, I’ve thoroughly enjoyed having access the pavement from Hamilton around past New Farm, the CBD and over to Southbank. With family based in Brisbane, long-term friends, colleagues I’ve worked with for the last two years, and QLD-based clients I’ve established since starting with IAM, I have plenty of reasons to come back for a visit!
>Adam’s Favourite Bonds
What are your favourite bonds at this time?
Macquarie 6.125% USD denominated AT1 – This note ranks alongside ASX listed capital notes/hybrids however has a significant pick up in yield. If investors can stomach the foreign exchange rate, or have USD to put to work, this would be one of my top recommendations.
Senior Secured Term Loan issued by Australian Financial Services provider – reach out if you’d like to learn more about this opportunity; at BBSW +550, there is a decent illiquidity premium built into this opportunity compared to some of the over-the-counter bonds we trade.
