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

October 2019

In the month of October, markets welcomed signs of easing tensions between the U.S. and China, with a remarkable progress in terms of signing phase one of a trade deal. From a monetary perspective, Central Banks maintained their dovish stance in line with the yet soft inflation figures, while the Federal Reserve cut interest rates for the third time in 2019. The more benevolent news was reflected in an upward movement in core government bond yields as opposed to the record tightening experienced in the precious months.

In Europe, economic data continues to pile pressures for fiscal stimulus with manufacturing PMI remaining flat at 45.7, while services PMI ticked slightly upwards. Likewise, consumer confidence continued to be impacted by negative economic data with a reading of negative 7.6 percent, the lowest since December last year. In this regard, looking at the struggling economic data, markets are hoping that the incoming ECB President, Christine Lagarde, will further ease monetary policies, if possible. With the latter being questioned, her challenge revolves around whether she will manage to convince politicians to implement a fiscal plan.

In addition to, to the surprise of markets, Prime Minister Boris Johnson was able to agree a new Brexit deal with the European Union. The new deal gained more support in the House of Commons; however, members of parliament refused to approve rushing through the legislation process in order to leave the EU on the 31 October deadline. This meant an extension to the departure deadline was agreed to 31 January 2019. A general election will now be held on 12 December, as the prime minister seeks a new parliamentary majority to pass his deal.

Looking at the fixed income asset class per se, despite the upward movements in the last week of October, government bond yields closed the month on a positive note following strong gains in the first weeks of the month. Thus topping their impressive run on a year-to-date basis. European High Yield traded relatively flat on a total return basis given the supportive income stream, while from a price return perspective, throughout the month spreads widened as weakness in economic data persisted.

The CC Euro High Income fund closed the month flat in line with core HY benchmarks. Throughout the month, the Manager continued to seek value in a very difficult yielding market, as companies continue to take an opportunistic approach and re-finance at lower yields. In this regard, the Manager increased its exposure to Banco Santander on an attractive valuation level, while it continued to manage the fund’s volatility.