The Income Fund fell by -0.3% during September, in line with the benchmark which also fell -0.3%.  

Higher interest rates came back into focus during the month, primarily driven by inflation concerns. Instead of our RBNZ, the US Federal Reserve took centre stage, taking their target rate from 3.75% to 4% - citing the same inflationary environment that our central bank is concerned with. 

These higher rates combined with some credit concerns were the main driver of the fund lowlights in September. Coreweave saw their EUR issued notes fall by 4.5% in the month as concerns around AI financing continued to fluctuate. As part of our investment process, we often talk with management of the companies we lend to. Early in the month we held a call with Coreweave to discuss their funding plans, returns on investments and the wider financing of AI infrastructure. This helped us to underwrite our existing thesis, which is predicated on their ability to deliver on contracted AI compute to high quality customers. 

Elsewhere, short term bonds from issuers like CDC Data Centres and NextDC were highlights as their floating rate features (their coupons increase as interest rates rise) benefitted from higher interest rates. Like Coreweave, these issuers are also building compute infrastructure for AI companies, but the market for these datacentre builders, particularly in Australia, remains much stronger. We took advantage of this fundamental disconnect, trimming positions in CDC and NextDC to deploy into bonds from issuers with more attractive prices.