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

May 2019

Risky assets struggled in May as trade war uncertainties emerged once again. The selloff that began in early May came as optimism over a trade agreement between the US and China turned to pessimism when negotiations hit a roadblock. In addition to, Mexico is now in the tariff loop after Trump threatened tariffs if illegal immigration is not handled.

Markets were caught by surprise as the trade-war saga seemed to be on the verge of a deal. However, the once again unpredictable Trump, triggered market volatility. Indeed, the saga extension has continued to build recession fears, which in turn triggered an exodus from risky assets into the more considered safer heavens, such as government bonds. Indeed, we’ve seen the 10-year Bund turning to negative levels of circa 0.201 percent from January’s positive 0.2 percent levels.

European High Yield suffered in the month given the risk-off mode, with spreads ticking the 434 bps levels. Liquidity has also had its weighting as we’ve experienced wider spreads, which in turn impacted valuation prices.

It must be said that the euphoria we had seen in the first three months of the year seemingly dissipated in May and was not strong to clock in another positive month. European High Yield was down 1.38% not only due to Trade War fears but also due to the ongoing uncertainty relating to Brexit and the Italian economy.

Indeed, in May, the Manager was faced with the aforementioned headwinds of volatility. Despite, the recently increased cash levels and the exposure to government bonds, this wasn’t sufficient to mitigate the volatile market. The Manager still believes that eventually the trade war saga would be resolved and in this regard, we should seem a positive sentiment. The Manager will continue to monitor the appropriate timing to deploy its current cash levels, in line with its objective.