Investment Objectives

The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in Emerging Marketequities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of Emerging Market bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-Emerging Market issuers.

The Fund is actively managed, not managed by reference to any index.

Investor Profile

A typical investor in the Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the Emerging Market Bond Fund are those with a medium to high tolerance to risk and who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle as well as the investment cycle commensurate with an investment in Emerging Markets.

Fund Rules at a Glance

The Investment Manager shall invest primarily but not solely in a diversified portfolio of Emerging Market Corporate fixed income securities and Emerging Market Government fixed income securities with maturities of 10 years or less, rated at the time of investment BBB+ to CCC+ by S&P, or in bonds determined to be of comparable quality by the Investment Manager. The Investment Manager may also invest up to 10% of the Net Assets of the Sub-Fund in unrated fixed income securities.

  • Minimum Credit Rating CCC+ (or equivalent)
  • Up to 10% in Non-Rated Bonds
  • Average Credit Quality of B- (or equivalent)
  • Emerging Market Issuers as per MSCI Emerging and Frontier
  • Up to 15% in Emerging Market Equities
  • Use of FDIs for hedging purposes only
  • No limit on exposure to CIS
  • Up to 30% in Non Emerging Market Issuers

Commentary

August 2024

Introduction

Emerging market (EM) credit extended on the notable run witnessed since the start of the year. The asset class has since delivered positive returns across the board, driven by both price appreciation and income generation. Indeed, the carry in hard currency issues was a key driver, providing valuable protection against an overall rise in US Treasury yields.  Whilst acting as a buffer, the reliable income stream made EM debt an attractive proposition.

Such extended run was observed despite sharp declines at the start of the month on the back of disappointing US economic data and a surprise interest rate hike by the Bank of Japan triggered a flight to safety. However, as the month progressed, optimism about potential Federal Reserve interest rate cuts were helpful for EM returns, as was a weaker US dollar which provided a tailwind for the region.

In numbers, EM corporate credit returned c. 9.89% year-to-date, with income return contributing around 4.76%. August alone saw a total return of c. 1.58%.

Market environment and performance

China’s economy, despite intermittent signs of recovery, remains heavily conditioned by negative sentiment surrounding the real estate market. The government’s response has thus far proved insufficient, with a recent 10-basis point cut to the one-year loan prime rate falling short of expectations and failing to revive sentiment.

The country’s remaining growth engines too are faltering, underscoring the urgent need for more substantial government intervention to achieve the increasingly unlikely growth target. With GDP growth forecasts now below the People’s Bank of China’s 5.0% target, expectations for stimulus are rising. Indeed, there is an urgent need for China to enhance policy support and ensure the effective implementation of earlier policies

China’s General Composite PMI stood at 51.2 in August 2024, unchanged from July’s 9-month low. Still, it was the tenth straight month of growth in private sector activity, with faster manufacturing output growth offsetting slower services activity expansion. Likewise, for new orders, a renewed improvement in the manufacturing sector contrasted with a slower increase in services new business, though overall growth picked up pace. Meanwhile, employment levels fell despite rising backlogged orders. On prices, input cost inflation rose slightly, but increased competition resulted in selling prices falling the most since January. Charges declined across both manufacturing and service sectors. Looking ahead, confidence strengthened. In August, China’s annual inflation rate climbed to 0.6% from 0.5% in July, falling short of market forecasts of 0.7%. It was also the seventh straight month of consumer inflation.

India continues to demonstrate remarkable resilience, with economic activity remaining robust for a 37th consecutive month, August’s Composite PMI reading showed. Service providers signalled the strongest rise in business activity since March while goods producers posted the weakest expansion in production for seven months. New orders rose substantially, though at the slowest pace since May, as the service sector posted a quicker increase but manufacturing saw a slowdown.

Latin America continues to present a nuanced economic picture, with Inflation, previously exhibiting continued signs of cooling, resurging, somewhat limiting the scope for further monetary easing. Despite such challenges, upward growth revisions in Brazil, Chile, and Mexico, coupled with attractive investment opportunities and improved corporate performance, are fuelling optimism about the region’s long-term prospects.

Fund performance

In August, the CC Emerging Market Bond Fund realized a gain of 1.48%. Throughout the month, the Manager maintained its allocation, following strategic adjustments made in the prior period.

Market and investment outlook

Looking ahead, the evolving global interest rate environment, particularly decisions by the Fed, will be crucial to monitor. Indeed, a dovish stance will prove beneficial, potentially translating into a weaker US dollar. On the contrary, a hawkish Fed stance (now seemingly fading) may lead to a sustained period of higher rates globally. A “higher-for-longer” dollar scenario indeed presents a challenge for EM economies, notably; reduced fund flows from foreign investors seeking higher returns elsewhere, and increased refinancing costs for companies with large foreign currency debt burdens.

With respect to the Emerging Market Bond Fund, the manager will continue to assess the market landscape and capitalize on appealing credit opportunities. Consistent with recent actions, the manager will continue to tailor the portfolio to match prevailing yield conditions while increasing the portfolio’s overall duration. This, whilst keeping a close eye on the political landscape within Emerging Markets and possible escalation of geopolitical tensions, which to-date have alas endured. With rate cut expectations now increasing over the year, optimism remains.

Key Facts & Performance

Fund Manager

Jordan Portelli

Jordan is CIO at CC Finance Group. He has extensive experience in research and portfolio management with various institutions. Today he is responsible of the group’s investment strategy and manages credit and multi-asset strategies.

PRICE (EUR)

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

€100000

FUND TYPE

UCITS

BASE CURRENCY

EUR

5 year performance*

0%

*View Performance History below
Inception Date: 01 Feb 2020
ISIN: MT7000026456
Bloomberg Ticker: CCEMBFF MV
Distribution Yield (%): 5.10%
Underlying Yield (%): 5.61%
Distribution: 31/03 and 30/09
Total Net Assets: $9.8 mn
Month end NAV in EUR: 61.73
Number of Holdings: 50
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

iShares JPM USD EM Bond
6.2%
5.8% Oryx Funding Ltd 2031
4.1%
6.625% NBM US Holdings Inc 2029
4.1%
5.8% Turkcell 2028
4.0%
4% HSBC Holdings plc perp
4.0%
4.75% Banco Santander SA perp
3.8%
5.60% Petrobras Global Finance 2031
3.0%
iShares JPM USD EM Corp Bond
2.9%
3.25% Export-Import BK India 2030
2.8%
3.625% Nemak SAB DE CV 2031
2.5%

Major Sector Breakdown*

Government
19.6%
Materials
8.3%
Asset 7
Communications
8.0%
Materials
7.9%
Consumer Staples
6.1%
Utilites
4.1%
*excluding exposures to CIS

Maturity Buckets*

41.7%
0-5 Years
35.6%
5-10 Years
10.4%
10 Years+
*based on the Next Call Date

Credit Ratings

Average Credit Rating: BB-

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

Brazil
14.2%
Mexico
10.9%
United States
10.0%
Malta (Incl. cash)
8.0%
India
6.6%
Oman
6.3%
Turkey
6.0%
Indonesia
5.9%
United Kingdom
4.0%
Spain
3.8%
*including exposures to CIS

Asset Allocation

Cash 3.3%
Bonds (incl. ETFs) 96.7%

Performance History (EUR)*

1 Year

8.63%

3 Year

-16.67%

* The EUR Distributor Share Class (Class F) was launched on 06 February 2020.
** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investor fromreinvestment of any dividends and additional interest gained through compounding.
*** Returns quoted net of TER. Entry and exit charges may reduce returns for investors.
**** The Annualised rate is an indication of the average growth of the Fund over one year. The value of the investment and the income yield derived from the investment, if any, may go down as well as up and past performance is not necessarily indicative of future performance, nor a reliable guide to future performance. Hence returns may not be achieved and you may lose all or part of your investment in the Fund. Currency fluctuations may affect the value of investments and any derived income.

Currency Allocation

USD 98.9%
Euro 1.1%
Data for risk statistics is not available for this fund.

Interested in this product?

  • Investment Objectives

    The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in Emerging Marketequities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of Emerging Market bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-Emerging Market issuers.

    The Fund is actively managed, not managed by reference to any index.

  • Investor profile

    A typical investor in the Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the Emerging Market Bond Fund are those with a medium to high tolerance to risk and who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle as well as the investment cycle commensurate with an investment in Emerging Markets.

    Investor Profile Icon
  • Fund Rules

    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

    • Minimum Credit Rating CCC+ (or equivalent)
    • Up to 10% in Non-Rated Bonds
    • Average Credit Quality of B- (or equivalent)
    • Emerging Market Issuers as per MSCI Emerging and Frontier
    • Up to 15% in Emerging Market Equities
    • Use of FDIs for hedging purposes only
    • No limit on exposure to CIS
    • Up to 30% in Non Emerging Market Issuers
  • Commentary

    August 2024

    Introduction

    Emerging market (EM) credit extended on the notable run witnessed since the start of the year. The asset class has since delivered positive returns across the board, driven by both price appreciation and income generation. Indeed, the carry in hard currency issues was a key driver, providing valuable protection against an overall rise in US Treasury yields.  Whilst acting as a buffer, the reliable income stream made EM debt an attractive proposition.

    Such extended run was observed despite sharp declines at the start of the month on the back of disappointing US economic data and a surprise interest rate hike by the Bank of Japan triggered a flight to safety. However, as the month progressed, optimism about potential Federal Reserve interest rate cuts were helpful for EM returns, as was a weaker US dollar which provided a tailwind for the region.

    In numbers, EM corporate credit returned c. 9.89% year-to-date, with income return contributing around 4.76%. August alone saw a total return of c. 1.58%.

    Market environment and performance

    China’s economy, despite intermittent signs of recovery, remains heavily conditioned by negative sentiment surrounding the real estate market. The government’s response has thus far proved insufficient, with a recent 10-basis point cut to the one-year loan prime rate falling short of expectations and failing to revive sentiment.

    The country’s remaining growth engines too are faltering, underscoring the urgent need for more substantial government intervention to achieve the increasingly unlikely growth target. With GDP growth forecasts now below the People’s Bank of China’s 5.0% target, expectations for stimulus are rising. Indeed, there is an urgent need for China to enhance policy support and ensure the effective implementation of earlier policies

    China’s General Composite PMI stood at 51.2 in August 2024, unchanged from July’s 9-month low. Still, it was the tenth straight month of growth in private sector activity, with faster manufacturing output growth offsetting slower services activity expansion. Likewise, for new orders, a renewed improvement in the manufacturing sector contrasted with a slower increase in services new business, though overall growth picked up pace. Meanwhile, employment levels fell despite rising backlogged orders. On prices, input cost inflation rose slightly, but increased competition resulted in selling prices falling the most since January. Charges declined across both manufacturing and service sectors. Looking ahead, confidence strengthened. In August, China’s annual inflation rate climbed to 0.6% from 0.5% in July, falling short of market forecasts of 0.7%. It was also the seventh straight month of consumer inflation.

    India continues to demonstrate remarkable resilience, with economic activity remaining robust for a 37th consecutive month, August’s Composite PMI reading showed. Service providers signalled the strongest rise in business activity since March while goods producers posted the weakest expansion in production for seven months. New orders rose substantially, though at the slowest pace since May, as the service sector posted a quicker increase but manufacturing saw a slowdown.

    Latin America continues to present a nuanced economic picture, with Inflation, previously exhibiting continued signs of cooling, resurging, somewhat limiting the scope for further monetary easing. Despite such challenges, upward growth revisions in Brazil, Chile, and Mexico, coupled with attractive investment opportunities and improved corporate performance, are fuelling optimism about the region’s long-term prospects.

    Fund performance

    In August, the CC Emerging Market Bond Fund realized a gain of 1.48%. Throughout the month, the Manager maintained its allocation, following strategic adjustments made in the prior period.

    Market and investment outlook

    Looking ahead, the evolving global interest rate environment, particularly decisions by the Fed, will be crucial to monitor. Indeed, a dovish stance will prove beneficial, potentially translating into a weaker US dollar. On the contrary, a hawkish Fed stance (now seemingly fading) may lead to a sustained period of higher rates globally. A “higher-for-longer” dollar scenario indeed presents a challenge for EM economies, notably; reduced fund flows from foreign investors seeking higher returns elsewhere, and increased refinancing costs for companies with large foreign currency debt burdens.

    With respect to the Emerging Market Bond Fund, the manager will continue to assess the market landscape and capitalize on appealing credit opportunities. Consistent with recent actions, the manager will continue to tailor the portfolio to match prevailing yield conditions while increasing the portfolio’s overall duration. This, whilst keeping a close eye on the political landscape within Emerging Markets and possible escalation of geopolitical tensions, which to-date have alas endured. With rate cut expectations now increasing over the year, optimism remains.

  • Key facts & performance

    Fund Manager

    Jordan Portelli

    Jordan is CIO at CC Finance Group. He has extensive experience in research and portfolio management with various institutions. Today he is responsible of the group’s investment strategy and manages credit and multi-asset strategies.

    PRICE (EUR)

    ASSET CLASS

    Bonds

    MIN. INITIAL INVESTMENT

    €100000

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    5 year performance*

    0%

    *View Performance History below
    Inception Date: 01 Feb 2020
    ISIN: MT7000026456
    Bloomberg Ticker: CCEMBFF MV
    Distribution Yield (%): 5.10%
    Underlying Yield (%): 5.61%
    Distribution: 31/03 and 30/09
    Total Net Assets: $9.8 mn
    Month end NAV in EUR: 61.73
    Number of Holdings: 50
    Auditors: Deloitte Malta
    Legal Advisor: Ganado Advocates
    Custodian: Sparkasse Bank Malta p.l.c.

    Performance To Date (EUR)

    Risk & Reward Profile

    1
    2
    3
    4
    5
    6
    7
    Lower Risk

    Potentialy Lower Reward

    Higher Risk

    Potentialy Higher Reward

    Top 10 Holdings

    iShares JPM USD EM Bond
    6.2%
    5.8% Oryx Funding Ltd 2031
    4.1%
    6.625% NBM US Holdings Inc 2029
    4.1%
    5.8% Turkcell 2028
    4.0%
    4% HSBC Holdings plc perp
    4.0%
    4.75% Banco Santander SA perp
    3.8%
    5.60% Petrobras Global Finance 2031
    3.0%
    iShares JPM USD EM Corp Bond
    2.9%
    3.25% Export-Import BK India 2030
    2.8%
    3.625% Nemak SAB DE CV 2031
    2.5%

    Top Holdings by Country*

    Brazil
    14.2%
    Mexico
    10.9%
    United States
    10.0%
    Malta (Incl. cash)
    8.0%
    India
    6.6%
    Oman
    6.3%
    Turkey
    6.0%
    Indonesia
    5.9%
    United Kingdom
    4.0%
    Spain
    3.8%
    *including exposures to CIS

    Major Sector Breakdown*

    Government
    19.6%
    Materials
    8.3%
    Asset 7
    Communications
    8.0%
    Materials
    7.9%
    Consumer Staples
    6.1%
    Utilites
    4.1%
    *excluding exposures to CIS

    Asset Allocation

    Cash 3.3%
    Bonds (incl. ETFs) 96.7%

    Maturity Buckets*

    41.7%
    0-5 Years
    35.6%
    5-10 Years
    10.4%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    1 Year

    8.63%

    3 Year

    -16.67%

    * The EUR Distributor Share Class (Class F) was launched on 06 February 2020.
    ** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investor fromreinvestment of any dividends and additional interest gained through compounding.
    *** Returns quoted net of TER. Entry and exit charges may reduce returns for investors.
    **** The Annualised rate is an indication of the average growth of the Fund over one year. The value of the investment and the income yield derived from the investment, if any, may go down as well as up and past performance is not necessarily indicative of future performance, nor a reliable guide to future performance. Hence returns may not be achieved and you may lose all or part of your investment in the Fund. Currency fluctuations may affect the value of investments and any derived income.

    Credit Ratings

    Average Credit Rating: BB-

    Currency Allocation

    USD 98.9%
    Euro 1.1%
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