Investment Objectives

The Sub-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.

The Fund is classified under Article 6 of the SFDR meaning that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

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 at a Glance

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 2023

Introduction

Emerging market (EM) corporate credit headed lower in August, underperforming developed markets as fears surrounding China’s slowing economic growth momentum and trouble yet brewing within the debt-laden property sector, weighed on investor sentiment.

The end of the month saw authorities announce further stimulus measures to bolster the economy, targeted to boost consumer spending and address challenges in the real estate sector. These included a reduction in interest rates, a lowering of down-payment ratios, and a trimming of home mortgage rates.

From a performance standpoint, Emerging Market corporate credit traded lower, recording a loss of c. 0.83%.

Market environment and performance

On the data front within the emerging market sphere, leading economic indicators – largely expected to portray a solid and sustained recovery following an economic reopening in China – continued to fall short of expectations. The Caixin China General Service PMI (51.8 v 51.9 in July) slipped as it missed market forecasts. New order growth slowed while export sales fell for the first time since last December. Meanwhile, Caixin Manufacturing PMI (reading 51.0 v 49.2 in July, and market estimates of 49.3) marked the strongest pace of expansion in factory activity since February amid multiple efforts from Beijing to revive a weakening post-pandemic recovery.

Contrasting China’s continued slowdown, business activity in India – the fastest-growing major economy in the world – continued to show a robust demand for Indian-made products and services. In August, S&P Global India manufacturing PMI (reading 58.6 v July’s 57.7) pointed to the 26th straight month of growth in factory activity, as new export orders rose sharply again. From the employment front, the solid pace of job creation, observed in the previous months, maintained. Services too aligned closely with market forecasts, boosted by rises in new orders, mainly in international sales. The S&P Global India Services PMI remained in expansionary territory at 60.1, lower than July’s 62.3.

Price pressures in EM markets have generally continued to show signs of easing, paving the way for a continued easing in policy tightening. In Mexico, annual inflation rate fell for a seven-straight month to 4.64% in August, from 4.79% in the previous month. Core inflation too eased to 6.08%. Notwithstanding the successive declines, inflation remains still above the central bank’s 2-4% target range. Chile, among the first to cut rates, too saw inflationary pressures ease.  Meanwhile, China – yet to find a stable footing as lacklustre demand continues to weigh on the economy – saw consumer prices rise, following a negative reading in the previous month.

Fund performance

In the month of August, the CC Emerging Market Bond Fund realized a loss of -1.66%, in line with moves observed within the emerging market space. Throughout the month, the Manager sought to reduce its cash exposure while increasing the portfolio’s exposure to sovereign bonds, while increasing the portfolio’s duration. This, namely through the republic of Brazil and republic of Poland.

Market and investment outlook

The positive momentum from the previous months came to a halt, as sentiment surrounding Emerging Markets worsened, in the absence of concrete support from China.

Indeed, the recovery in China – an important driver also to global economic growth – remains unclear with expectations of stronger policy support to revitalise growth, still expected by many. The effectiveness of the measures implemented so far is yet to be determined. In August, the Chinese government reiterated its commitment to bolstering the economy. New initiatives were targeted to address challenges in the real estate sector and to boost consumer spending.

In Latin America, after raising interest rates aggressively during the post-coronavirus rebound, the trade-off between controlling inflation and supporting growth is now decisively tipping towards easing. Central Bank of Chile’s decision, in its July meeting, to lower rates by more than expected marked the start of a broad easing trend within emerging markets. Brazil followed suit, cutting its key Selic rate by 50bps to 13.25% after keeping borrowing costs on hold for eight consecutive sessions, while the market expected a 25bps cut.  Such move shall likely support emerging markets, fueling gains and brightening the outlook for growth-sensitive assets.

A quick introduction to our Malta Government Bond Fund.

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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 (USD)

$

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

$3000

FUND TYPE

UCITS

BASE CURRENCY

USD

RETURN (SINCE INCEPTION)*

-12.26%

*View Performance History below
Inception Date: 02 Nov 2017
ISIN: MT7000021234
Bloomberg Ticker: CCEMBFB MV
Entry Charge: Up to 2.5%
Total Expense Ratio: 2.03%
Exit Charge: None
Distribution Yield (%): 4.5
Underlying Yield (%): 5.94
Distribution: 31/03 and 30/09
Total Net Assets: $9.7 mn
Month end NAV in USD: 70.54
Number of Holdings: 49
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.
% of Top 10 Holdings: 38.0

Performance To Date (USD)

Top 10 Holdings

iShares JPM USD EM Bond
6.0%
5.8% Oryx Funding Ltd 2031
4.0%
5.8% Turkcell 2028
3.9%
6.625% NBM US Holdings Inc 2029
3.9%
4.375% Freeport-McMoran Inc 2028
3.9%
iShares JPM USD EM Corp Bond
3.8%
4% HSBC Holdings plc perp
3.7%
4.75% Banco Santander SA perp
3.2%
5.60% Petrobras Global Finance 2031
3.0%
3.25% Export-Import BK India 2030
2.7%

Major Sector Breakdown*

Government
17.4%
Materials
9.8%
Financials
6.9%
Funds
6.0%
Consumer Staples
5.9%
Consumer Discretionary
4.2%
*excluding exposures to CIS

Maturity Buckets*

40.3%
0-5 Years
33.7%
5-10 Years
12.6%
10 Years+
*based on the Next Call Date

Credit Ratings

Average Credit Rating: B+

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

United States
15.1%
Brazil
13.8%
Mexico
10.6%
Malta (incl. Cash)
7.7%
Oman
6.2%
Turkey
6.0%
India
5.7%
Indonesia
3.8%
United Kingdom
3.7%
Spain
3.2%
*including exposures to CIS

Asset Allocation

Cash 3.6%
Bonds (incl. ETFs) 96.4%

Performance History (EUR)*

YTD

-1.75%

2022

-13.20%

2021

0.24%

2020

-0.70%

2019

10.40%

Annualised Since Inception****

-2.22%

* The USD Distributor Share Class (Class B) was launched on 03 November 2017.
** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investor from reinvestment of any dividends and additional interest gained through compounding.
*** 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 96.2%
Euro 3.8%
Data for risk statistics is not available for this fund.

Interested in this product?

  • Investment Objectives

    The Sub-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.

    The Fund is classified under Article 6 of the SFDR meaning that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

  • 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 2023

    Introduction

    Emerging market (EM) corporate credit headed lower in August, underperforming developed markets as fears surrounding China’s slowing economic growth momentum and trouble yet brewing within the debt-laden property sector, weighed on investor sentiment.

    The end of the month saw authorities announce further stimulus measures to bolster the economy, targeted to boost consumer spending and address challenges in the real estate sector. These included a reduction in interest rates, a lowering of down-payment ratios, and a trimming of home mortgage rates.

    From a performance standpoint, Emerging Market corporate credit traded lower, recording a loss of c. 0.83%.

    Market environment and performance

    On the data front within the emerging market sphere, leading economic indicators – largely expected to portray a solid and sustained recovery following an economic reopening in China – continued to fall short of expectations. The Caixin China General Service PMI (51.8 v 51.9 in July) slipped as it missed market forecasts. New order growth slowed while export sales fell for the first time since last December. Meanwhile, Caixin Manufacturing PMI (reading 51.0 v 49.2 in July, and market estimates of 49.3) marked the strongest pace of expansion in factory activity since February amid multiple efforts from Beijing to revive a weakening post-pandemic recovery.

    Contrasting China’s continued slowdown, business activity in India – the fastest-growing major economy in the world – continued to show a robust demand for Indian-made products and services. In August, S&P Global India manufacturing PMI (reading 58.6 v July’s 57.7) pointed to the 26th straight month of growth in factory activity, as new export orders rose sharply again. From the employment front, the solid pace of job creation, observed in the previous months, maintained. Services too aligned closely with market forecasts, boosted by rises in new orders, mainly in international sales. The S&P Global India Services PMI remained in expansionary territory at 60.1, lower than July’s 62.3.

    Price pressures in EM markets have generally continued to show signs of easing, paving the way for a continued easing in policy tightening. In Mexico, annual inflation rate fell for a seven-straight month to 4.64% in August, from 4.79% in the previous month. Core inflation too eased to 6.08%. Notwithstanding the successive declines, inflation remains still above the central bank’s 2-4% target range. Chile, among the first to cut rates, too saw inflationary pressures ease.  Meanwhile, China – yet to find a stable footing as lacklustre demand continues to weigh on the economy – saw consumer prices rise, following a negative reading in the previous month.

    Fund performance

    In the month of August, the CC Emerging Market Bond Fund realized a loss of -1.66%, in line with moves observed within the emerging market space. Throughout the month, the Manager sought to reduce its cash exposure while increasing the portfolio’s exposure to sovereign bonds, while increasing the portfolio’s duration. This, namely through the republic of Brazil and republic of Poland.

    Market and investment outlook

    The positive momentum from the previous months came to a halt, as sentiment surrounding Emerging Markets worsened, in the absence of concrete support from China.

    Indeed, the recovery in China – an important driver also to global economic growth – remains unclear with expectations of stronger policy support to revitalise growth, still expected by many. The effectiveness of the measures implemented so far is yet to be determined. In August, the Chinese government reiterated its commitment to bolstering the economy. New initiatives were targeted to address challenges in the real estate sector and to boost consumer spending.

    In Latin America, after raising interest rates aggressively during the post-coronavirus rebound, the trade-off between controlling inflation and supporting growth is now decisively tipping towards easing. Central Bank of Chile’s decision, in its July meeting, to lower rates by more than expected marked the start of a broad easing trend within emerging markets. Brazil followed suit, cutting its key Selic rate by 50bps to 13.25% after keeping borrowing costs on hold for eight consecutive sessions, while the market expected a 25bps cut.  Such move shall likely support emerging markets, fueling gains and brightening the outlook for growth-sensitive assets.

  • 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 (USD)

    $

    ASSET CLASS

    Bonds

    MIN. INITIAL INVESTMENT

    $3000

    FUND TYPE

    UCITS

    BASE CURRENCY

    USD

    RETURN (SINCE INCEPTION)*

    -12.26%

    *View Performance History below
    Inception Date: 02 Nov 2017
    ISIN: MT7000021234
    Bloomberg Ticker: CCEMBFB MV
    Entry Charge: Up to 2.5%
    Total Expense Ratio: 2.03%
    Exit Charge: None
    Distribution Yield (%): 4.5
    Underlying Yield (%): 5.94
    Distribution: 31/03 and 30/09
    Total Net Assets: $9.7 mn
    Month end NAV in USD: 70.54
    Number of Holdings: 49
    Auditors: Deloitte Malta
    Legal Advisor: Ganado Advocates
    Custodian: Sparkasse Bank Malta p.l.c.
    % of Top 10 Holdings: 38.0

    Performance To Date (USD)

    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 Bond
    6.0%
    5.8% Oryx Funding Ltd 2031
    4.0%
    5.8% Turkcell 2028
    3.9%
    6.625% NBM US Holdings Inc 2029
    3.9%
    4.375% Freeport-McMoran Inc 2028
    3.9%
    iShares JPM USD EM Corp Bond
    3.8%
    4% HSBC Holdings plc perp
    3.7%
    4.75% Banco Santander SA perp
    3.2%
    5.60% Petrobras Global Finance 2031
    3.0%
    3.25% Export-Import BK India 2030
    2.7%

    Top Holdings by Country*

    United States
    15.1%
    Brazil
    13.8%
    Mexico
    10.6%
    Malta (incl. Cash)
    7.7%
    Oman
    6.2%
    Turkey
    6.0%
    India
    5.7%
    Indonesia
    3.8%
    United Kingdom
    3.7%
    Spain
    3.2%
    *including exposures to CIS

    Major Sector Breakdown*

    Government
    17.4%
    Materials
    9.8%
    Financials
    6.9%
    Funds
    6.0%
    Consumer Staples
    5.9%
    Consumer Discretionary
    4.2%
    *excluding exposures to CIS

    Asset Allocation

    Cash 3.6%
    Bonds (incl. ETFs) 96.4%

    Maturity Buckets*

    40.3%
    0-5 Years
    33.7%
    5-10 Years
    12.6%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    YTD

    -1.75%

    2022

    -13.20%

    2021

    0.24%

    2020

    -0.70%

    2019

    10.40%

    Annualised Since Inception****

    -2.22%

    * The USD Distributor Share Class (Class B) was launched on 03 November 2017.
    ** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investor from reinvestment of any dividends and additional interest gained through compounding.
    *** 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: B+

    Currency Allocation

    USD 96.2%
    Euro 3.8%
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