Investment Objectives

The Fund aims to maximise the total level of return for investors by investing, mainly in a diversified portfolio of bonds and other similar debt securities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of corporate & government bonds maturing in the medium term, with an average credit quality of “Ba3” by Moody’s or “BB-” by S&P, although individual bond holdings may have higher or lower ratings. The Fund can also invest up to 10% of its assets in Non-Rated bond issues.

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

Investor Profile

A typical investor in the CC High Income Bond Fund Accumulator is:

  • Seeking to accumulate wealth and save over time in a product that re-invests gross dividends automatically.
  • Planning to hold their investment for the medium-to-long term so as to benefit from the compound interest effect.

Fund Rules

The Investment Manager of the CC High Income Bond Fund Accumulator – EUR 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 of the fund. Some of the restrictions include:

  • 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

Commentary

December 2022

Introduction

2022, a year – possibly like no other in recent market history – was characterised by economic uncertainty and significant market volatility.

Geopolitical tensions in eastern Europe and central banks’ battle against inflationary pressures, took centre stage, proving to be the main sources of market struggles. Indeed, bond markets felt the pinch, ending the year substantially negative, notwithstanding some relief witnessed in the final quarter of the year as market participants clinched to the idea that inflation may have possibly peaked, paving the way for the pace of interest rate rises to slow. Also, in China strict coronavirus restrictions – a major dampener on domestic demand – were in the final quarter eased, re-igniting hopes that the country is incrementally heading towards the end of its zero-Covid policy. Such news was positively digested, alleviating overall market sentiment.

Market environment and performance

Forward looking indicators, namely PMIs continued to paint a somewhat gloomy landscape, noting a deterioration – albeit at a softer pace in both manufacturing and service segments – in the rate of growth. Manufacturing (reading 47.8 v a previous month reading of 47.1) remained in contractionary territory despite inflationary pressures easing and supply chains showing signs of stabilizing. Output fell the least since June while the decline in factory sales was the softest in four months. Services (reading 49.8 v a preliminary estimate of 49.1 and previous month reading of 48.5) showed signs of improvement, albeit pointing to a fifth successive drop.

In December, inflationary pressures continued to show signs of easing, with major economies in the euro Area witnessing a decline in pricing pressures, preliminary estimates showed. Notably, Germany saw headline inflation falling to 8.6 from 9.1%. France too saw inflationary pressures easing, falling to 5.9 from 6.4%, as costs declined for energy and services. Largely, inflation in the Euro area, dropped to 9.2 from 10.1%. Core inflation, which excludes transitory or temporary price volatility, edged higher to 5.2%. Supporting such trajectory was the decline in Producer Prices (PPI) – a forward looking indicator measuring the average change in the price of goods and services sold by manufacturers and producers in the wholesale market – down to 27.1 from 30.5%.

Aggregate business activity in the US pointed to a continued solid contraction across the private sector. Notably, composite PMI reading in December fell to 44.6 from November’s 46.4, driven by worsening conditions in both manufacturing and service sectors. Manufacturing PMI (reading 46.2) pointed to the biggest contraction in factory activity since May 2020. Output fell at a solid pace while new orders fell at one of the fastest rates ever as companies noted weaker client demand, stemming from economic uncertainty and inflationary pressures leading to lower purchasing power among customers. Meanwhile, services slumped to 44.4 in December from 46.2 in the previous month – the fastest pace of contraction in the service sector for four months and the quickest since 2009.

Annual inflation rate in the US, for a sixth successive month, slowed to 6.5% – in line with market forecasts of 6.6%. Month-on-month, consumer prices were down 0.1%, from the 0.1% increase in November and below expectations of a flat reading. Data, from the employment front, continued to somewhat point to a tight labour market, with incoming data proving largely mixed. Non-farm payrolls print showed that 223k jobs were created in December compared to market expectations of 200k, wage growth came in below expectations while unemployment rate fell to 3.5 from 3.7%. Meanwhile, the labour force participation rate edged higher to 62.3 from 62.2% in the previous month.

Throughout the month of December, market participants continued to monitor economic data and interpret how such figures will ultimately dictate policy action going forward. Notably, whether monetary politicians will maintain their aggressive hawkish stance or whether there is a scope for slowing the pace. Recent market trends taught us that positive numbers tend to be a drag on markets and serve as an additional dose of monetary tightening. From a performance point of view, December saw the upward trend partially paused, as the pace witnessed during the final quarter of 2022, slowed. Indeed, global high yield indices edged marginally lower, a loss of c. 0.10%. For the full year, global high yield credit saw losses amounting to 11.84%.

Fund performance

In the month of December, the CC High Income Bond Fund remained flat over the previous month end. Throughout the month the Manager took opportunity of the recent widening in spreads by re-tapping selective names which relatively offered value whilst increasing the portfolio’s overall duration and exposure to US high yield corporate credit.

For the full year, the fund saw a return of -10.13%, outperforming its comparable benchmark.

Market and investment outlook

In 2023, the Manager expects credit markets to largely remain conditioned by monetary decisions taken, continuing to substantially alter benchmark yields. A longer hiking cycle and a higher terminal rate is now anticipated in the US. The quantum of each hike, however may possibly be lower than we have over recent months envisaged. This, remaining data dependent on mainly inflation and tightness within the labour market. In Europe the economic situation starkly varies. In terms of monetary policy employed, the ECB – acting with a lag and at a somewhat slower pace when compared to the Fed – is expected to maintain its recent pace. Consumer sentiment however remains at notable lows and the energy crisis, at present allayed by warmer weather, still looms. Colder weather and/or adverse decisions by OPEC+/Russia may indeed threaten energy supplies and thus higher energy prices, in recent weeks proving benevolent to home owners and businesses.

A quick introduction to our Euro High Income 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 (EUR)

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

€2500

FUND TYPE

UCITS

BASE CURRENCY

EUR

RETURN (SINCE INCEPTION)*

5.67%

*View Performance History below
Inception Date: 30 May 2013
ISIN: MT7000007761
Bloomberg Ticker: CALCHAR MV
Entry Charge: None
Total Expense Ratio: 1.49%
Exit Charge: None
Distribution Yield (%): N/A
Underlying Yield (%): 5.13
Distribution: N/A
Total Net Assets: €51.67 mn
Month end NAV in EUR: 115.20
Number of Holdings: 129
Auditors: Deloitte Malta
Legal Advisor: Ganado & Associates
Custodian: Sparkasse Bank Malta p.l.c.
% of Top 10 Holdings: 19.60

Performance To Date (EUR)

Top 10 Holdings

iShares USD High Yield Corp Distr
2.7%
iShares Euro High Yield Corp
2.5%
iShares Fallen Angels HY Corp
2.4%
4% JP Morgan Chase & Co perp
2.0%
Lyxor ESG Euro High Yield
1.9%
4.75% Banco Santander perp
1.7%
5.628% Encore Capital Group 2028
1.7%
5.299% Petrobras Global Fin 2025
1.7%
2.5% Hapag-Lloyd AG 2028
1.6%
4.625% Volkswagen Intl Fin NV perp
1.5%

Major Sector Breakdown*

Funds
9.7%
Asset 7
Communications
8.7%
Industrials
5.4%
Consumer Discretionary
5.1%
Materials
4.6%
Consumer Discretionary
4.2%
*excluding exposures to CIS

Maturity Buckets*

72.1%
0-5 Years
10.7%
5-10 Years
2.0%
10 Years+
* based on the Next Call Date

Credit Ratings*

Average Credit Rating: BB-
*excluding exposures to CIS

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

France
9.1%
Germany
9.0%
Netherlands
5.8%
Brazil
5.5%
Spain
5.2%
Italy
3.1%
Turkey
3.0%
Malta
2.9%
Mexico
2.1%
Switzerland
1.9%
*including exposures to CIS

Asset Allocation

Cash 5.6%
Bonds 84.8%
CIS/ETFs 9.7%

Performance History (EUR)*

YTD

-10.13%

2021

1.46%

2020

-0.14%

2019

7.48%

2018

-6.45%

Annualised Since Inception*

0.58%

* The Accumulator Share Class (Class A) was launched on 29 May 2013. 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.
**Returns quoted net of TER. Entry and exit charges may reduce returns for investors.

Currency Allocation

Euro 63.9%
USD 36.1%
Other 0.0%

Risk Statistics

Sharpe Ratio
-0.59 (3Y)
-0.57 (5Y)
Std. Deviation
9.49% (3Y)
7.60% (5Y)

Interested in this product?

  • Investment Objectives

    The Fund aims to maximise the total level of return for investors by investing, mainly in a diversified portfolio of bonds and other similar debt securities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of corporate & government bonds maturing in the medium term, with an average credit quality of “Ba3” by Moody’s or “BB-” by S&P, although individual bond holdings may have higher or lower ratings. The Fund can also invest up to 10% of its assets in Non-Rated bond issues.

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

  • Investor profile

    A typical investor in the CC High Income Bond Fund Accumulator is:

    • Seeking to accumulate wealth and save over time in a product that re-invests gross dividends automatically.
    • Planning to hold their investment for the medium-to-long term so as to benefit from the compound interest effect.
    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

    • 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
  • Commentary

    December 2022

    Introduction

    2022, a year – possibly like no other in recent market history – was characterised by economic uncertainty and significant market volatility.

    Geopolitical tensions in eastern Europe and central banks’ battle against inflationary pressures, took centre stage, proving to be the main sources of market struggles. Indeed, bond markets felt the pinch, ending the year substantially negative, notwithstanding some relief witnessed in the final quarter of the year as market participants clinched to the idea that inflation may have possibly peaked, paving the way for the pace of interest rate rises to slow. Also, in China strict coronavirus restrictions – a major dampener on domestic demand – were in the final quarter eased, re-igniting hopes that the country is incrementally heading towards the end of its zero-Covid policy. Such news was positively digested, alleviating overall market sentiment.

    Market environment and performance

    Forward looking indicators, namely PMIs continued to paint a somewhat gloomy landscape, noting a deterioration – albeit at a softer pace in both manufacturing and service segments – in the rate of growth. Manufacturing (reading 47.8 v a previous month reading of 47.1) remained in contractionary territory despite inflationary pressures easing and supply chains showing signs of stabilizing. Output fell the least since June while the decline in factory sales was the softest in four months. Services (reading 49.8 v a preliminary estimate of 49.1 and previous month reading of 48.5) showed signs of improvement, albeit pointing to a fifth successive drop.

    In December, inflationary pressures continued to show signs of easing, with major economies in the euro Area witnessing a decline in pricing pressures, preliminary estimates showed. Notably, Germany saw headline inflation falling to 8.6 from 9.1%. France too saw inflationary pressures easing, falling to 5.9 from 6.4%, as costs declined for energy and services. Largely, inflation in the Euro area, dropped to 9.2 from 10.1%. Core inflation, which excludes transitory or temporary price volatility, edged higher to 5.2%. Supporting such trajectory was the decline in Producer Prices (PPI) – a forward looking indicator measuring the average change in the price of goods and services sold by manufacturers and producers in the wholesale market – down to 27.1 from 30.5%.

    Aggregate business activity in the US pointed to a continued solid contraction across the private sector. Notably, composite PMI reading in December fell to 44.6 from November’s 46.4, driven by worsening conditions in both manufacturing and service sectors. Manufacturing PMI (reading 46.2) pointed to the biggest contraction in factory activity since May 2020. Output fell at a solid pace while new orders fell at one of the fastest rates ever as companies noted weaker client demand, stemming from economic uncertainty and inflationary pressures leading to lower purchasing power among customers. Meanwhile, services slumped to 44.4 in December from 46.2 in the previous month – the fastest pace of contraction in the service sector for four months and the quickest since 2009.

    Annual inflation rate in the US, for a sixth successive month, slowed to 6.5% – in line with market forecasts of 6.6%. Month-on-month, consumer prices were down 0.1%, from the 0.1% increase in November and below expectations of a flat reading. Data, from the employment front, continued to somewhat point to a tight labour market, with incoming data proving largely mixed. Non-farm payrolls print showed that 223k jobs were created in December compared to market expectations of 200k, wage growth came in below expectations while unemployment rate fell to 3.5 from 3.7%. Meanwhile, the labour force participation rate edged higher to 62.3 from 62.2% in the previous month.

    Throughout the month of December, market participants continued to monitor economic data and interpret how such figures will ultimately dictate policy action going forward. Notably, whether monetary politicians will maintain their aggressive hawkish stance or whether there is a scope for slowing the pace. Recent market trends taught us that positive numbers tend to be a drag on markets and serve as an additional dose of monetary tightening. From a performance point of view, December saw the upward trend partially paused, as the pace witnessed during the final quarter of 2022, slowed. Indeed, global high yield indices edged marginally lower, a loss of c. 0.10%. For the full year, global high yield credit saw losses amounting to 11.84%.

    Fund performance

    In the month of December, the CC High Income Bond Fund remained flat over the previous month end. Throughout the month the Manager took opportunity of the recent widening in spreads by re-tapping selective names which relatively offered value whilst increasing the portfolio’s overall duration and exposure to US high yield corporate credit.

    For the full year, the fund saw a return of -10.13%, outperforming its comparable benchmark.

    Market and investment outlook

    In 2023, the Manager expects credit markets to largely remain conditioned by monetary decisions taken, continuing to substantially alter benchmark yields. A longer hiking cycle and a higher terminal rate is now anticipated in the US. The quantum of each hike, however may possibly be lower than we have over recent months envisaged. This, remaining data dependent on mainly inflation and tightness within the labour market. In Europe the economic situation starkly varies. In terms of monetary policy employed, the ECB – acting with a lag and at a somewhat slower pace when compared to the Fed – is expected to maintain its recent pace. Consumer sentiment however remains at notable lows and the energy crisis, at present allayed by warmer weather, still looms. Colder weather and/or adverse decisions by OPEC+/Russia may indeed threaten energy supplies and thus higher energy prices, in recent weeks proving benevolent to home owners and businesses.

  • 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)*

    5.67%

    *View Performance History below
    Inception Date: 30 May 2013
    ISIN: MT7000007761
    Bloomberg Ticker: CALCHAR MV
    Entry Charge: None
    Total Expense Ratio: 1.49%
    Exit Charge: None
    Distribution Yield (%): N/A
    Underlying Yield (%): 5.13
    Distribution: N/A
    Total Net Assets: €51.67 mn
    Month end NAV in EUR: 115.20
    Number of Holdings: 129
    Auditors: Deloitte Malta
    Legal Advisor: Ganado & Associates
    Custodian: Sparkasse Bank Malta p.l.c.
    % of Top 10 Holdings: 19.60

    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 USD High Yield Corp Distr
    2.7%
    iShares Euro High Yield Corp
    2.5%
    iShares Fallen Angels HY Corp
    2.4%
    4% JP Morgan Chase & Co perp
    2.0%
    Lyxor ESG Euro High Yield
    1.9%
    4.75% Banco Santander perp
    1.7%
    5.628% Encore Capital Group 2028
    1.7%
    5.299% Petrobras Global Fin 2025
    1.7%
    2.5% Hapag-Lloyd AG 2028
    1.6%
    4.625% Volkswagen Intl Fin NV perp
    1.5%

    Top Holdings by Country*

    France
    9.1%
    Germany
    9.0%
    Netherlands
    5.8%
    Brazil
    5.5%
    Spain
    5.2%
    Italy
    3.1%
    Turkey
    3.0%
    Malta
    2.9%
    Mexico
    2.1%
    Switzerland
    1.9%
    *including exposures to CIS

    Major Sector Breakdown*

    Funds
    9.7%
    Asset 7
    Communications
    8.7%
    Industrials
    5.4%
    Consumer Discretionary
    5.1%
    Materials
    4.6%
    Consumer Discretionary
    4.2%
    *excluding exposures to CIS

    Asset Allocation

    Cash 5.6%
    Bonds 84.8%
    CIS/ETFs 9.7%

    Maturity Buckets*

    72.1%
    0-5 Years
    10.7%
    5-10 Years
    2.0%
    10 Years+
    * based on the Next Call Date

    Performance History (EUR)*

    YTD

    -10.13%

    2021

    1.46%

    2020

    -0.14%

    2019

    7.48%

    2018

    -6.45%

    Annualised Since Inception*

    0.58%

    * The Accumulator Share Class (Class A) was launched on 29 May 2013. 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.
    **Returns quoted net of TER. Entry and exit charges may reduce returns for investors.

    Credit Ratings*

    Average Credit Rating: BB-
    *excluding exposures to CIS

    Currency Allocation

    Euro 63.9%
    USD 36.1%
    Other 0.0%

    Risk Statistics

    Sharpe Ratio
    -0.59 (3Y)
    -0.57 (5Y)
    Std. Deviation
    9.49% (3Y)
    7.60% (5Y)
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