IBC – Ironbark Balanced Income Limited
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Investment Performance
For the year to 30 June 2025, the Ironbark portfolio returned 8.4% inclusive of franking credits, underperforming the Benchmark (1 year swap + 6%p.a.) of 9.84%. The return was achieved with less than one third of the volatility experienced by the ASX Index which reflects the portfolio’s defensive income characteristics and sound management practices.
The investment performance over 3 years of 9.7%pa and over 5 years of 9.9%pa was very satisfactory and has been achieved in times of economic volatility from Covid, high inflation, monetary tightening and trade wars. The absolute return focus and income emphasis of the Investment Manager, Kaplan Funds Management has provided healthy medium, and long term returns for shareholders.
Reposition Ironbark for Income Investors
The phasing out of the ASX listed bank hybrid market by APRA announced last year created a ground swell of new products seeking to tap into the runoff of nearly $40 billion of hybrid investments looking for a new home over the next 7 years.
A number of new income products from LIC’s to private credit funds have been launched for this purpose with most trading at or near NTA and offering similar yields to Ironbark but without the healthy long-term track record of Ironbark.
We believe Ironbark is well positioned to benefit from investment demand seeking alternatives to the hybrid market and have proposed at this AGM to change the company name to Ironbark Balanced Income and to move to more regular dividend payments. Initially, the move will be quarterly dividend payments from half yearly, commencing with the March quarter 2026. The portfolio benchmark will be reset to be commensurate with income objectives at the official cash rate plus 3%pa (inclusive of franking credits). The investment approach by the manager remains unchanged.
The other attributes of Ironbark that are seen as appealing to income investors are:
• Access to diversified income strategies
• A demonstrable long term successful track record
• A highly liquid and transparent portfolio
• No private credit or private equity exposure
• No performance fee and competitive management fee
• An investment manager aligned with other shareholders through a substantial shareholding by the Kaplan group.
• A Dividend yield of 5.8% or 7.7% gross up for franking credits at 43.5c per share.
• A current NTA discount of 25% to the October NTA of 57.8c (after tax) – which provides significant capital growth upside.
The Outlook
For the four months to 31 October 2025, the Ironbark portfolio returned 4.7% and has proven defensive in the recent selloff in US and Australian equity markets so far in November.
The Australian economy faces some challenges in 2026 stemming from sticky inflation and low productivity with implications for interest rates and business confidence. Volatile US equity markets are also expected to influence markets, and the manager has adopted a defensive stance in the portfolio.
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that’s what they say .. it’s always hard to remove the NTA discount
Market cap is only $46M
