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

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.

Furthermore, despite the U.S. economy growing 3.2 percent in Q1, the inversion in the U.S. yield curve continued to strengthen, stirring fears of recession. While the current backdrop of economic strength seems like an unlikely environment for additional monetary stimulus, markets feared a Fed rate cut.

Indeed, the less risky bonds, in particular, demonstrated a flight to safety, as the 10-Year U.S. Treasury yield hit a twenty-month low, closing the month at 2.13 percent, while U.S. High yield suffered a 1.03 percent loss.

For three consecutive months, the fund outperformed its internal comparable benchmark on a net basis, by circa 40bps following the more volatile markets as opposed to January and February. The Manager believes that the fund is well positioned, especially in current markets, both in terms of capital appreciation, based on its EM exposure which to date lacked its U.S. peers, but also from a volatility perspective, given its active management.