Investment Objectives

The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market (“EM”) Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in EM equities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of EM bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-EM issuers.

The Fund is actively managed, not managed by reference to any index.

Investor Profile

A typical investor in the CC Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the CC Emerging Market Bond Fund are those with a medium to high tolerance to risk and who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle as well as the investment cycle commensurate with an investment in Emerging Markets.

Fund Rules

The Investment Manager shall invest primarily but not solely in a diversified portfolio of Emerging Market Corporate fixed income securities and Emerging Market Government fixed income securities with maturities of 10 years or less, rated at the time of investment “Baa1” to “Caa1” by Moody’s or “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality by the Investment Manager. The Investment Manager may also invest up to 10% of the Net Assets of the Sub-Fund in unrated fixed income securities.

  • Minimum Credit Rating CCC+ (or equivalent)
  • Up to 10% in Non-Rated Bonds
  • Average Credit Quality of B- (or equivalent)
  • Emerging Market Issuers as per MSCI Emerging and Frontier
  • Up to 15% in Emerging Market Equities
  • Use of FDIs for hedging purposes only
  • No limit on exposure to CIS
  • Up to 30% in Non Emerging Market Issuers

Commentary

August 2022

Introduction
Uncertainties, seemingly far from abating in emerging market (EM) economies, have – at least on year-to-date basis – conditioned performance of corporate credit.

Political uncertainty, stemming from the upcoming presidential elections in Latin America’s largest economy; Brazil, have long posed as a threat. With elections looming, uncertainty remains particularly as incumbent Jair Bolsonaro may not be willing to accept a result other than one which sees him re-elected. To date, pro-people candidate Luiz Inácio Lula da Silva is seemingly the favourite to become president. Weakness in major EM nation China is also persisting as coronavirus flare-ups, a consequence of vaccinations distributed proving to be sub-par to those administered in Europe, led the country to maintain its zero-tolerance to coronavirus, dampening sentiment. Additionally, troubles in its real estate sector and major heatwaves and drought continue to condition the economic trajectory of the nation.

Despite such lingering doubts, a better-than-expected economic momentum in many markets alleviated sentiment in the month of August, leading to a positive performance. Still, EM corporate credit remains considerably in the red on a year-to-date basis. 

Market environment and performance
From the data front in the emerging market world, leading indicators, particularly PMI data continued to show signs of weakness. In China, the composite PMI reading, albeit remaining in expansionary territory, continued to show signs of weakness. Manufacturing, unexpectedly declined to 49.5 in August from July’s of 50.4, missing market forecasts of 50.2, and pointing to the first contraction in the sector since May. The latest print reflected the impact of widespread coronavirus restrictions and energy shortages following the historic drought. Output grew at the softest pace in three months, with both new orders and buying levels falling for the first time since May. Albeit remaining in expansionary territory, Services also saw declines, with the PMI falling to 55.0 from 55.5 in the previous month.

In Brazil, private sector business activity fell to 53.2 in August of 2022 from 55.3 in the previous month, marking the 14th consecutive period of growth in Brazil’s private sector. Growth in business activity eased from the record pace for the services sector (53.9 v 55.8 in July) as demand proved robust, while slowing for the manufacturing sector (51.9 vs 54) pointing to the weakest improvement in the health of the sector since April. Despite being the third successive month of slowdown, it remains above the long-run average of 50.8.

Price pressures in EM markets, albeit somewhat easing, persisted. In Brazil, annual inflation eased to 10.07% in July from 11.89% in the previous month, the lowest reading since last December as prices of transport and household articles eased. Along the same path, India’s inflation rate edged lower to a five-month low of 6.71% as a slowdown was observed in the cost of food, transportation & communication, and health.

In August EM corporate credit edged 0.99% higher, continuing to reverse losses observed in H1 2022 and outperforming both European and US corporate credit at both investment grade and high yield levels. On a year-to-date basis, the segment remains substantially negative, a total return summing to -17.26%.

Fund performance
In the month of August, the CC Emerging Market Bond Fund registered a gain of 1.49%, in line with the spread tightening in EM corporate credit. Throughout the month the Manager continued to seek pockets of value, looking at attractive opportunities which may well yield capital appreciation.

Market and investment outlook
Consequent to the continued political uncertainty in important regions, Russia-Ukraine tensions seemingly persisting, and uncertainty in China surrounding the coronavirus pandemic and lingering property crisis – sustained, notwithstanding the monetary and fiscal aid set to alleviate the debt-ridden sector – EMs may in 2022 possibly continue to witness some volatility. That said, the Manager will continue to assess the emerging market space scenario even on the basis of further monetary policy actions taken by Central Banks, which seem to follow the Fed’s stance.

In terms of bond picking, the Manager will continue to monitor the current unprecedented environment and take opportunities in attractive credit stories which should continue to add value to the portfolio. The widening observed in corporate credit spreads over the calendar year may indeed pose an opportunity, presenting attractive entry points to yield capital appreciation. That being said, a cautious approach is as things stand warranted. 

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Key Facts & Performance

Fund Manager

Jordan Portelli

Jordan is CIO at CC Finance Group. He has extensive experience in research and portfolio management with various institutions. Today he is responsible of the group’s investment strategy and manages credit and multi-asset strategies.

PRICE (EUR)

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

€2500

FUND TYPE

UCITS

BASE CURRENCY

EUR

RETURN (SINCE INCEPTION)*

-25.54%

*View Performance History below
Inception Date: 03 Nov 2017
ISIN: MT7000021242
Bloomberg Ticker: CCEMBFC MV
Entry Charge: up to 2.50%
Total Expense Ratio: 1.78%
Exit Charge: None
Distribution Yield (%): N/A
Underlying Yield (%): 5.24
Distribution: N/A
Total Net Assets: $10.2 mn
Month end NAV in EUR: 75.46
Number of Holdings: 45
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.
% of Top 10 Holdings: 34.5

Performance To Date (EUR)

Top 10 Holdings

iShares JPM USD EM Corp Bond
3.8%
iShares JPM USD EM Bond
3.8%
5.8% Oryx Funding ltd 2031
3.7%
4.375% Freeport McMoran 2028
3.7%
5.45% Cemex SAB DE CV 2029
3.7%
4% HSBC Holdings plc perp
3.4%
5.8% Turkcell 2028
3.2%
4.75% Banco Santander SA perp
3.1%
5.299% Petrobras Global Fin 2025
3.0%
6.5% Global Ports Finance 2023
3.0%

Major Sector Breakdown*

Asset 7
Communications
9.8%
Industrials
8.1%
Materials
8.0%
Funds
5.8%
Materials
5.8%
Real Estate
4.8%
*excluding exposures to CIS

Maturity Buckets*

47.8%
0-5 Years
22.4%
5-10 Years
7.6%
10 Years+
*based on the Next Call Date

Credit Ratings

Average Credit Rating: BB-

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

Malta (incl. cash)
22.2%
Brazil
11.2%
United States
10.1%
Mexico
9.5%
India
7.4%
China
6.8%
Oman
5.8%
Russia
5.2%
Turkey
5.1%
Indonesia
3.9%
*including exposures to CIS

Asset Allocation

Cash 12.6%
Bonds (incl. ETFs) 87.4%

Performance History (EUR)*

YTD

-17.11%

2021

-1.72%

2020

-3.19%

2019

6.57%

2018

-9.09%

Annualised since Inception***

-5.66%

* The EUR Accumulator Share Class (Class C) was launched on 03 November 2017.
** Returns quoted net of TER. Entry and exit charges may reduce returns for investors.
*** The Annualised rate is an indication of the average growth of the Fund over one year. The value of the investment and the income yield derived from the investment, if any, may go down as well as up and past performance is not necessarily indicative of future performance, nor a reliable guide to future performance. Hence returns may not be achieved and you may lose all or part of your investment in the Fund. Currency fluctuations may affect the value of investments and any derived income.

Currency Allocation

USD 97.2%
Euro 1.8%
Data for risk statistics is not available for this fund.

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  • Investment Objectives

    The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market (“EM”) Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in EM equities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of EM bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-EM issuers.

    The Fund is actively managed, not managed by reference to any index.

  • Investor profile

    A typical investor in the CC Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the CC Emerging Market Bond Fund are those with a medium to high tolerance to risk and who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle as well as the investment cycle commensurate with an investment in Emerging Markets.

    Investor Profile Icon
  • Fund Rules

    The Investment Manager of the CC High Income Bond Funds – EUR and USD has the duty to ensure that the underlying investments of the funds are well diversified. According to the prospectus, the investment manager has to abide by a number of investment restrictions to safeguard the value of the assets

    • Minimum Credit Rating CCC+ (or equivalent)
    • Up to 10% in Non-Rated Bonds
    • Average Credit Quality of B- (or equivalent)
    • Emerging Market Issuers as per MSCI Emerging and Frontier
    • Up to 15% in Emerging Market Equities
    • Use of FDIs for hedging purposes only
    • No limit on exposure to CIS
    • Up to 30% in Non Emerging Market Issuers
  • Commentary

    August 2022

    Introduction
    Uncertainties, seemingly far from abating in emerging market (EM) economies, have – at least on year-to-date basis – conditioned performance of corporate credit.

    Political uncertainty, stemming from the upcoming presidential elections in Latin America’s largest economy; Brazil, have long posed as a threat. With elections looming, uncertainty remains particularly as incumbent Jair Bolsonaro may not be willing to accept a result other than one which sees him re-elected. To date, pro-people candidate Luiz Inácio Lula da Silva is seemingly the favourite to become president. Weakness in major EM nation China is also persisting as coronavirus flare-ups, a consequence of vaccinations distributed proving to be sub-par to those administered in Europe, led the country to maintain its zero-tolerance to coronavirus, dampening sentiment. Additionally, troubles in its real estate sector and major heatwaves and drought continue to condition the economic trajectory of the nation.

    Despite such lingering doubts, a better-than-expected economic momentum in many markets alleviated sentiment in the month of August, leading to a positive performance. Still, EM corporate credit remains considerably in the red on a year-to-date basis. 

    Market environment and performance
    From the data front in the emerging market world, leading indicators, particularly PMI data continued to show signs of weakness. In China, the composite PMI reading, albeit remaining in expansionary territory, continued to show signs of weakness. Manufacturing, unexpectedly declined to 49.5 in August from July’s of 50.4, missing market forecasts of 50.2, and pointing to the first contraction in the sector since May. The latest print reflected the impact of widespread coronavirus restrictions and energy shortages following the historic drought. Output grew at the softest pace in three months, with both new orders and buying levels falling for the first time since May. Albeit remaining in expansionary territory, Services also saw declines, with the PMI falling to 55.0 from 55.5 in the previous month.

    In Brazil, private sector business activity fell to 53.2 in August of 2022 from 55.3 in the previous month, marking the 14th consecutive period of growth in Brazil’s private sector. Growth in business activity eased from the record pace for the services sector (53.9 v 55.8 in July) as demand proved robust, while slowing for the manufacturing sector (51.9 vs 54) pointing to the weakest improvement in the health of the sector since April. Despite being the third successive month of slowdown, it remains above the long-run average of 50.8.

    Price pressures in EM markets, albeit somewhat easing, persisted. In Brazil, annual inflation eased to 10.07% in July from 11.89% in the previous month, the lowest reading since last December as prices of transport and household articles eased. Along the same path, India’s inflation rate edged lower to a five-month low of 6.71% as a slowdown was observed in the cost of food, transportation & communication, and health.

    In August EM corporate credit edged 0.99% higher, continuing to reverse losses observed in H1 2022 and outperforming both European and US corporate credit at both investment grade and high yield levels. On a year-to-date basis, the segment remains substantially negative, a total return summing to -17.26%.

    Fund performance
    In the month of August, the CC Emerging Market Bond Fund registered a gain of 1.49%, in line with the spread tightening in EM corporate credit. Throughout the month the Manager continued to seek pockets of value, looking at attractive opportunities which may well yield capital appreciation.

    Market and investment outlook
    Consequent to the continued political uncertainty in important regions, Russia-Ukraine tensions seemingly persisting, and uncertainty in China surrounding the coronavirus pandemic and lingering property crisis – sustained, notwithstanding the monetary and fiscal aid set to alleviate the debt-ridden sector – EMs may in 2022 possibly continue to witness some volatility. That said, the Manager will continue to assess the emerging market space scenario even on the basis of further monetary policy actions taken by Central Banks, which seem to follow the Fed’s stance.

    In terms of bond picking, the Manager will continue to monitor the current unprecedented environment and take opportunities in attractive credit stories which should continue to add value to the portfolio. The widening observed in corporate credit spreads over the calendar year may indeed pose an opportunity, presenting attractive entry points to yield capital appreciation. That being said, a cautious approach is as things stand warranted. 

  • Key facts & performance

    Fund Manager

    Jordan Portelli

    Jordan is CIO at CC Finance Group. He has extensive experience in research and portfolio management with various institutions. Today he is responsible of the group’s investment strategy and manages credit and multi-asset strategies.

    PRICE (EUR)

    ASSET CLASS

    Bonds

    MIN. INITIAL INVESTMENT

    €2500

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    RETURN (SINCE INCEPTION)*

    -25.54%

    *View Performance History below
    Inception Date: 03 Nov 2017
    ISIN: MT7000021242
    Bloomberg Ticker: CCEMBFC MV
    Entry Charge: up to 2.50%
    Total Expense Ratio: 1.78%
    Exit Charge: None
    Distribution Yield (%): N/A
    Underlying Yield (%): 5.24
    Distribution: N/A
    Total Net Assets: $10.2 mn
    Month end NAV in EUR: 75.46
    Number of Holdings: 45
    Auditors: Deloitte Malta
    Legal Advisor: Ganado Advocates
    Custodian: Sparkasse Bank Malta p.l.c.
    % of Top 10 Holdings: 34.5

    Performance To Date (EUR)

    Risk & Reward Profile

    1
    2
    3
    4
    5
    6
    7
    Lower Risk

    Potentialy Lower Reward

    Higher Risk

    Potentialy Higher Reward

    Top 10 Holdings

    iShares JPM USD EM Corp Bond
    3.8%
    iShares JPM USD EM Bond
    3.8%
    5.8% Oryx Funding ltd 2031
    3.7%
    4.375% Freeport McMoran 2028
    3.7%
    5.45% Cemex SAB DE CV 2029
    3.7%
    4% HSBC Holdings plc perp
    3.4%
    5.8% Turkcell 2028
    3.2%
    4.75% Banco Santander SA perp
    3.1%
    5.299% Petrobras Global Fin 2025
    3.0%
    6.5% Global Ports Finance 2023
    3.0%

    Top Holdings by Country*

    Malta (incl. cash)
    22.2%
    Brazil
    11.2%
    United States
    10.1%
    Mexico
    9.5%
    India
    7.4%
    China
    6.8%
    Oman
    5.8%
    Russia
    5.2%
    Turkey
    5.1%
    Indonesia
    3.9%
    *including exposures to CIS

    Major Sector Breakdown*

    Asset 7
    Communications
    9.8%
    Industrials
    8.1%
    Materials
    8.0%
    Funds
    5.8%
    Materials
    5.8%
    Real Estate
    4.8%
    *excluding exposures to CIS

    Asset Allocation

    Cash 12.6%
    Bonds (incl. ETFs) 87.4%

    Maturity Buckets*

    47.8%
    0-5 Years
    22.4%
    5-10 Years
    7.6%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    YTD

    -17.11%

    2021

    -1.72%

    2020

    -3.19%

    2019

    6.57%

    2018

    -9.09%

    Annualised since Inception***

    -5.66%

    * The EUR Accumulator Share Class (Class C) was launched on 03 November 2017.
    ** Returns quoted net of TER. Entry and exit charges may reduce returns for investors.
    *** The Annualised rate is an indication of the average growth of the Fund over one year. The value of the investment and the income yield derived from the investment, if any, may go down as well as up and past performance is not necessarily indicative of future performance, nor a reliable guide to future performance. Hence returns may not be achieved and you may lose all or part of your investment in the Fund. Currency fluctuations may affect the value of investments and any derived income.

    Credit Ratings

    Average Credit Rating: BB-

    Currency Allocation

    USD 97.2%
    Euro 1.8%
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