The Income Fund rose 0.3% during August, in line with the benchmark which also rose +0.3%. The one-year return is 2.8%, ahead of the benchmark return of +0.7%. 

Coreweave reported a strong Q2 early in the month, showing an increasing backlog of customers for their GPU cloud business, with strong indications that pricing was also moving higher. Despite this, bonds were a lowlight for the month, dropping slightly. The primary concern is that there is simply too much being built, too quickly. This is driving fears that markets will be unable to finance the insatiable demand for AI compute capacity, therefore hurting Coreweave’s business model. We think these fears are rational but will abate as the payback period for Coreweave is very short. This should provide solid evidence of a self-sustaining business within the next two years, giving us comfort with their position in our portfolio. 

Elsewhere, CDC Datacentres was a highlight as the Canberra-based company continues its own buildout of AI infrastructure. The Australian market for AI compute is very strong, with gigawatts of demand to come online within the next five years. The local market has been happy to fund both CDC and NextDC, and we have benefitted from credit spreads tightening since we purchased their bonds, driving returns higher. 

Blue Owl Capital was also a highlight in August, with their AUD and USD denominated bonds both rallying during the month. As a global leader in alternative capital solutions, Blue Owl benefitted from increasing optimism surrounding global private credit, particularly loans made to software companies. These loans had been cause for concern as AI advancements in coding lowered the prospective value of software companies globally. August saw several companies (such as Salesforce and Atlassian) release strong results where AI proved beneficial to earnings growth. This positive sentiment helped our position in Blue Owl bonds, which returned 0.8%-1.0% during the month.