High Income Bond Fund USD Accumulator

The CC 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

January 2019

The long awaited boost in markets occurred in January; the dovish approach taken by both the Federal Reserve (Fed) and the European Central Bank (ECB) allowed markets to have a positive retracement. Indeed, credit markets were in need of some sort of comfort being from a monetary aspect or from the geopolitical front following a negative 2018. In fact, markets applauded the dovish stance amid concerns of slow global growth and geopolitical uncertainty.

Latest data from China continued to display signs of softness specifically inflation being less than expected, while manufacturing activity contracted for the second time in January. In this regard, we should continue to see further stimulus from the fiscal and monetary front. Other regions have also showed weakness with Germany facing the consequences of the Trade War. This was witnessed in the latest industrial figures that registered its worst performance in more than 5 years.

Moreover, Brexit and Italy are other uncertainties for 2019. The latter was dragged into a recession with uncertainty increasing due to the very unpopular economic measures being implemented by the populist government, which are however seen to be very welcomed by southern Italy citizens.

A positive for credit markets in January was the Fed’s dovish tone with the market now pricing no interest rate hikes for 2019.This led to a tighter U.S. Treasury Curve and a weaker dollar. Furthermore, the ECB also softened its tone on the back of geopolitical issues.

For 2019, we are more constructive given the recent supporting monetary stance, which should be a positive trigger for HY debt. In the month of January, the fund outperformed the market as the Managers opted in dipping into credit that was harshly impacted in 2018. The Managers will continue to seek value in credit stories with attractive valuations and adjust the cash levels accordingly.