Global High Income Bond Fund Accumulator

The CC Global 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.

President Biden has shown that he is not afraid to spend big. Following the passage of the American Rescue Plan – a USD 1.9 trillion stimulus package passed in March – the president has outlined his plans for two more spending packages. The USD 2.3 trillion American Jobs Plan is designed to invest in the country’s infrastructure, while the USD 1.8 trillion American Families Plan will aim to ensure a more equitable recovery, with many key tax credits from the Rescue bill being extended or made permanent. This has been a key driver for the upward movement in asset prices.

The plans outline proposals to increase the corporate, top marginal income, and capital gains tax rates in order to pay for the spending. While the passage of the Rescue plan through Congress was fairly straightforward, these further plans are likely to be more contentious. It is likely that compromises will need to be made on both the spending and taxation proposals in order for the bills to pass.

US Treasuries ended a run of 4 consecutive monthly declines as they rose 0.8% in April. That came as the Fed continued to reassure investors that they were in no rush to roll back monetary stimulus, and wanted to see actual rather than just forecasted progress. Yields on 10yr US Treasuries ended the month -11.5bps lower, which is the biggest monthly decline since last July.

Data has largely reflected the mood within markets and unfolded as expected. In April, U.S. reported a strong level of economic activity, albeit below expectations. U.S. manufacturing PMI came in at 60.7, below the forecast of 65.0 and lower than the previous month’s reading of 64.7. It should be noted that base effects begin to come into play. U.S. services PMI continued its upward trend, rising to 64.7 compared to 60.4 and expectations of 63.1.

Within the high yield asset space, U.S. high yield under performed better than its European counterparts, returning 1% compared to 0.6% returned in Europe. The asset class continued to benefit from the stimulus package and fed commitment to maintain rates low for the foreseeable future.

Throughout the month of April, the CC Global High Income Bond Fund rose by 1%. Throughout the month the Manager continued to seek pockets of value by looking into attractive credit stories, primarily within the automotive and financial sector.

Going forward the Manager believes that credit markets will continue to be supported by the actions taken by the Fed as well as the uplift from the sequential easing of Covid-19 restrictions and vaccination developments.