Euro High Income Bond Fund Accumulator

The CC Euro High Income Bond Fund Accumulator aims to maximise the total level of return for investors through investment in a diversified portfolio of Bonds. To achieve this objective, the Investment Manager invests primarily in a diversified portfolio of over 65 intermediate term, corporate & government bonds with maturities of 10 years and less.

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 may not invest more than 10% of its assets in the same company
• The fund may not keep more than 10% of its assets on deposit with any one credit institution. This limit may be increased to 30% in respect of deposits with an Approved Institution
• The fund may not invest more than 20% of its assets in any other other fund
• The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments

April 2021

In April, expectations for spectacular economic growth turned from forecast to fact, as the reopening of economies lifted developed market economic data and risk assets to boot. Investors had been positioned for the recovery for a number of months now and it came as little surprise that the re-opening of economies would bring about. The rotation trade from growth to value took a breather in April, with Treasury yields also falling back from their March peak of 1.75% to end the month at 1.63%.

Investor sentiment was supported by the continued economic recovery, with numerous indicators showing incredibly strong growth, as well as reassurance from the Fed that they were in no hurry to withdraw monetary stimulus anytime soon. The biggest story in April was a major rise in commodity prices across the board, with agricultural prices in particular seeing an astonishing surge. Copper topped the leader board with a 12.1% increase, which takes the metal to its highest level in a decade. The move has been aided by continued hopes for the global economic recovery as the vaccine rollout proceeds, as well as the fact that copper stands to benefit from a wave of fiscal support that’s set to see fresh spending on infrastructure and clean energy goals.

Covid-19 vaccine worldwide continued to proceed well, with countries such as the US and UK reporting the majority of their citizens now having received at least one dose, allowing for what looks like the start of a sustained reopening of their economies. In continental Europe, after a difficult start to the vaccine campaign it’s been encouraging to see that the pace of vaccination has accelerated significantly. Prospects for vaccine supply have improved, and by the end of April, the daily rate of vaccinations in major euro area member states had reached between 0.6% and 0.8% of the total population. European countries have struggled to varying degrees to get on top of recent Covid-19 outbreaks, but cases in the region are heading in the right direction.

From the data front, Europe’s largest economy, Germany reported strong PMI data for manufacturing at 66.2. Services were still subdued at 49.9, a shy below breakeven level. The stage is set for robust growth in factory activity, amid further gains in output and new orders going forward.

Eurozone’s manufacturing PMI also remained strong at 62.9. Meanwhile, services PMI of the single currency expanded to 50.5 compared to 49.6 in the previous month. Consumer confidence – a metric that the level of consumer confidence in economic activity in the euro area, increased to -8.1 points in April from -10.8 points a month earlier consolidating an upward trend.

We continue to believe that the pace of economic recovery in Europe will be different to that in the US, therefore we will continue to tactfully time the exiting from European sovereigns with caution.

Yields on Europe’s most sought after benchmark; the 10-year German Bund, closed marginally lower than the previous month at -0.206% compared to -0.292% the previous month. Conversely, Italy’s 10-year sovereign yield closed the month wider at 0.858% compared to 0.663% in March, and the Spanish 10-year closed 1 bps wider at 0.475%.

The CC Euro High Income Bond Fund increased by 0.52 per cent throughout the month. Throughout the month the Manager continued to seek pockets of value by looking into attractive credit stories, primarily within the financials, shipping, automotive and metals segments.

Going forward the Managers believe that credit markets will continue to be aided by the support of primarily monetary politicians, creating a positive technical environment. In terms of bond picking, the Managers will continue to monitor the current environment and take opportunities in attractive credit stories which should continue to add value to the portfolio.