Global Balanced Income Fund Distributor

The Fund seeks to provide stable, long-term capital appreciation by investing in a diversified portfolio of local and international bonds, equities and other income-generating assets.

The manager may invest in both Investment Grade and High Yield bonds rated at the time of investment at least “B-” by S&P, or in bonds determined to be of comparable quality.

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

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

• The fund aims to diversify its assets broadly among countries, industries and sectors, but can invest a substantial portion in one or more countries (or regions) if economic and business conditions warrant such investments
• The Fund may invest up 10% in non-rated bonds, whilst maintain an exposure to direct rated bonds of at least 25% of the value of the Fund. 
• Investments in equity securities may include, but are not limited to, dividend-paying securities, equities, ETFs and preferred shares of global issuers.
• The Fund will generally, but not exclusively, invest in blue chip issuers listed on Regulated Markets, including equities listed on the Malta Stock Exchange, where applicable
• We shall manage the credit risk and aim to manage interest rate risk through credit analysis and credit diversity. We may invest in both investment grade (corporate and sovereign) and high yield bonds that have a credit rating of at least “B-” by S&P (or rating equivalent issued by other reputable rating agencies) at the time of investment,
• The Sub-Fund may invest a maximum of 10% of its assets in non-rated debt securities, including those listed on the Malta Stock Exchange.
• At all times, the fund will maintain an exposure to direct rated bonds, of at least 25% of the value of the Fund

July 2025

Introduction

July continued the bullish momentum form last month as global markets reached fresh highs based on strong corporate earnings and easing trade concerns – especially following the US – EU tariff deal lowering rates to 15% and a temporary US – China tariff truce. Additional trade deals closed by the US with other main Asian economies like Japan, Korea and Vietnam also fuelled investor optimism. Fiscal developments added to the benevolent backdrop as the One Big Beautiful Bill Act passed through the US Congress introducing more expansive tax cuts and spending. On the geopolitical front, a ceasefire between Israel and Iran in the final week of the month helped stabilized oil market and ease inflation pressures, however rising yields in global government bonds reminded that fiscal sustainability concerns remain. The slowly overriding sentiment is that the Trump administration agenda despite being challenged initially from all corners has somehow managed overcoming all obstacles and might already claim victory having proven doubters wrong. All initial targets seem to have been checked: US tariffs have been successful levied without any retribution except from China, financial markets sentiment has fully recovered, the US dollar and energy prices weakened and the economy has not been hurt. However, history is a flux, not a snapshot, just like financial markets. Winning over the short term might prove just a transition to a bleaker long-term outcome. Of course, hoping it will not eventually happen is a human reflex. That is no excuse for not being prepared should it ultimately happen.

From the monetary front, the FED held rates steady, maintaining its “wait-and-see” approach amid tariff uncertainty and mixed data. The main obstacle to adopting a more dovish approach is the fact that determining how tariffs will affect inflation will require ongoing observation. However, dissenters within the FOMC have led a shift in the tone of monetary policy, and analysts are already aligning forecasting more rate cuts for this year. In Europe, the ECB also opted keeping interest rates unchanged, marking the first pause in a yearlong sequence of rate cuts – eight in total since the half of 2024. Such decision has been backed by the fact that in spite of inflation stabilizing at the 2% target, the economic backdrop remains uncertain, with risks stemming from trade tensions, a strong euro and potential import-driven disinflation.

July turned better for equity markets as the earnings season progressed as initial fears of first blows from tariffs proved to be unfounded and companies managed to exceed expectations on a higher than usual ratio, albeit from a very low basis one should admit. But this really was not the whole story, as technology and communication names (essentially Magnificent 7 names) have managed shadowing the more restrained if not disappointing numbers coming from businesses having direct contact with the consumer. This has brought back the old matter of concentrated market performance in very few names, which usually means that momentum will last as long as these high flyers keep on delivering. An old feeling reminiscent of 2021 is in the air, with a very familiar, although not that vividly coloured view. Risk-on appetite filled with retail buy-the-dip episodes, a revival of the IPO market with exceptional listing day performances, semiconductor stocks rallying, sky-high valuation for the new kids on the block (read Palantir), and everything else that would qualify markets as “giddy”. Long gone are the days when markets were staring into the abyss of trade wars-led de-globalization, bond vigilantes could spoil the markets when asking uncomfortable questions about public debt deficits financing. It looks like financial markets have managed a workaround on commercial tariffs and are happy to look to the opposite direction when somebody is pointing to frothy valuations. What could go wrong here?

Market Environment and Performance

In the Euro area, GDP growth slowed to 0.1% in Q2, down from the 0.6% performance in Q1 2025, as per preliminary estimates. While slightly ahead of expectations, it does mark the weakest pace since late 2023. The deceleration reflects a more cautious stance by consumers, who are weighting easing inflation and lower interest rates against rising trade-related uncertainty, particularly stemming from US tariff policy. Business activity showed modest improvement, as the monthly Composite PMI rose to 51.0, its highest reading in 11 months, driven by strength in services and a less pessimistic tone in manufacturing. Headline inflation held steady at 2.0%, slightly above expectations and in line with the ECB’s target.

In the US, the economy expanded at a stronger than expected 3.0% annualized pace in Q2, recovering from a 0.5% contraction in Q1. The rebound was driven largely by a plunge in imports, which followed a front-loaded surge in Q1 as businesses and consumers rushed to secure goods ahead of anticipated tariff hikes. Forward-looking indicators suggest economic momentum carried into Q3. The July Composite PMI rose to 54.6 from 52.9 in June, the strongest reading this year. The improvement was led by a pickup in services activity, while manufacturing posted moderate gains.

In July, global equity markets put on a stunning rally led decisively by the US and in particular by its technology behemoths. While the earnings season provided some stellar results in particular from Meta Platforms and Microsoft, this has conveyed the message that AI capex does seem to worth after all in terms of revenue growth and operating margins improvement. This brought new life to the AI-related stocks frenzy, with Nvidia becoming the first public company to reach a $4 trillion market valuation. The risk-on sentiment has pushed indexes performance up, but index performance breath down, resulting in a US market even more concentrated compared to the latest bubble, namely 2021. As the US dollar found a bottom and started recovering some of the ground lost in the last quarter, it gave an even more competitive advantage to the US market. The US market outperformed again Europe, while China outperformed its emerging market peers, and Japan was the laggard during the period. The S&P 500 index gained a whopping 5.21% in EUR terms driven by the Magnificent 7 plus Oracle, Broadcom and Palantir. European markets delivered a decent, but by no means impressive performance. The EuroStoxx50 gained 0.31% while the DAX gained 0.65% as energy, financials and industrials sectors outperformed.

In fixed income, US 10-year Treasury yields briefly climbed above 4.50% mid-month before easing to 4.37%, as investors positioned cautiously ahead of the Federal Reserve’s policy decision. Corporate credit markets, supported by improving corporate fundamentals and a more optimistic risk environment, advanced across the board. European corporate credit outperformed, with investment-grade and lower-rated bonds returning 0.51% and 1.18%, respectively. U.S. high yield delivered a more modest 0.40% gain.

Fund performance

In the month of July, the Global Balanced Income Fund registered a 0.84% gain. On the equity allocation, the Fund’s portfolio has been reviewed and rebalanced, as the Manager aligned it to the overriding market sentiment. New conviction names Mercedes-Benz Group AG and Prosus NV have been added given expectations of improved return potential over the short to medium term. Consequently, the Rheinmetall AG, Lam Research, Spotify Technology, Netflix Inc and Euroapi SA holdings have been liquidated based on decreased upside expectations and negative stock momentum.

From a fixed-income perspective, the manager continued to gradually increase the portfolio’s income yield in anticipation of further policy easing. This involved capitalising on emerging opportunities (particularly in the IPO space) and rotating positions within existing issuers, executing selective buy and sell transactions in names such as ZF Finance and CPI Property Group. The manager also initiated positions in Paprec Holdings and Nissan Motors, funded by the sale of local bond issues that offered lower income yields than the newly added securities.

Market and investment outlook

Going forward, the Manager believes that the economic landscape appears to show some initial signs of weakness, and this could accelerate in the near future as the impact form the US tariffs will slowly creep into the global trade and supply chains. While in particular the inflation situation might deteriorate going forward, a potential support could be expected form a swift change in attitude from the FED delivering interest rate cuts sooner than previously expected. Nevertheless, it is rather unclear how much this could help consumer sentiment, particularly in the short term, thus diminishing expectations for a positive economic outlook to the end of the year. There is a general sense that we are yet to see the worst part of the negative impact on the global macroeconomic landscape from the US tariffs. In view of the possible rate cuts mentioned above credit markets should benefit in terms of price appreciation, and naturally higher duration bonds are expected to perform better, while the short-end of the curve could also experience a positive shock on the actual action by central bankers.

From the equity front, the Manager remains cautious as regards the current momentum in equity markets as this does not seem to reflect any potential incoming upheaval, while the unfavourable seasonality factor remains in place.  The strategic allocation remains based on long-term convictions to quality companies benefitting from secular growth trends agnostic to specific macroeconomic developments. The Manager shall deploy capital opportunistically in specific sectors, and using cash levels as dry powder during episodes of market overshooting.