Investment Objectives

The Fund aims to maximise the total level of return for investors by investing, mainly in a diversified portfolio of bonds and other similar debt securities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of corporate & government bonds maturing in the medium term, with an average credit quality of “Ba3” by Moody’s or “BB-” by S&P, although individual bond holdings may have higher or lower ratings. The Fund can also invest up to 10% of its assets in Non-Rated bond issues.

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

Investor Profile

A typical investor in the CC High Income Bond Fund Distributor is:

  • Seeking to earn a high level of regular income
  • Seeking an actively managed & diversified investment in high income bonds.

Fund Rules

The Investment Manager of the CC High Income Bond Fund has the duty to ensure that the underlying holdings 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 of the funds. Some of the restrictions include:

  • The fund may not invest more than 10% of its assets in securities listed by the same body
  • 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 fund
  • The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments

Commentary

May 2022

Introduction
Market concerns, notably; lingering key macro-economic risks stemming from the war in Ukraine, monetary policy tightening as central banks continue to grapple with inflation, and a zero-tolerance coronavirus policy leading to stringent restrictions in China – threatening demand and sustaining supply-chain related disruptions, have in May continued to pose as a block to a shift in sentiment. A risk-off mode somewhat persisted, with credit market performance proving somewhat mixed.

U.S. corporate credit edged higher as treasury yields reversed some of the recent upward moves witnessed at the long-end of the curve, following a slight shift in the Fed’s tone, now seemingly more cautious as risks to growth increased. European credit remained in the red, furthering on the recent month’s negative performance.

Market environment and performance
Forward looking indicators, notably PMI data painted a somewhat mixed picture as manufacturing, albeit revised higher from initial estimate of 54.4 to 54.6, maintained its downward trend as new orders fell for the first time since June 2020 while output growth remained sluggish. Services, albeit pointing to the second-fastest expansion since September, edged lower as new business intakes, supported by a renewed increase in new orders from overseas customers, continued to rise.  Owing to a softer service sector expansion amid signs that the post lockdown rebound was losing some strength, the Eurozone Composite PMI fell to a 4-month low of 54.8. Price pressures in the Euro area remained. In May, energy and food prices continued to contribute to a rise in annual inflation; a fresh record high at 8.1 per cent, in-line with expectations and marginally higher than the previous month reading of 7.4 per cent. Core inflation, which excludes transitory or temporary price volatility, rose to 3.8 per cent. Month-on-month, inflation increased by 0.8 per cent.

Aggregate business activity in the US continued to signal an expansion across the private sector. That said, a softer Composite PMI reading was in May witnessed following softer data in manufacturing and services.  Notably, services came in lower at 53.40 from the previous months reading of 55.60, while manufacturing headed lower to 57.0 from 59.2 in April, pointing to the slowest albeit robust growth in factory activity since January. Annual inflation rate in the US unexpectedly accelerated to 8.6 per cent in May, from 8.3 per cent in the previous month. The reading marked the highest since December 1981 as energy prices rose 34.6 per cent and food costs surged 10.1 per cent. Core inflation, which excludes transitory or temporary price volatility, slowed to 6.0 per cent from 6.2 per cent a month earlier.

European sovereign yields furthered on the strong upward trajectory witnessed in previous months, heading to the highest in years on expectations of a more aggressive tightening stance by the ECB, aiming to support the currency and taming inflation, in spite of concerns surrounding the Euro area growth outlook, cut to 2.7 per cent this year from the 4.0 per cent predicted earlier in February. Minutes from April’s ECB meeting revealed ECB policymakers’ worries over high inflation and agreement towards a gradual normalisation of monetary policy. After reaching a peak close of 3.13 per cent in the beginning of the month – fuelled by the Fed’s hawkish stance and rate rise by half a point to 0.75-1 per cent during its May meeting – US Treasury yields largely reversed as worries over the outlook for growth and potential to stagnate, in a period of policy tightening continued to weigh on markets. Chair of the Fed Jerome Powell stated that the central bank will not hesitate to keep raising interest rates until inflation falls in a clear and convincing way, even if that involves moving past broadly understood levels of neutral.

The yield on the 10-year German Bund, closed the month at 1.05 per cent, 12bps higher than the previous month end.  Bond yields of sovereigns within the bloc’s periphery moved in tandem, albeit some rising at somewhat faster pace. The yield on the benchmark 10-year Treasury closed the month 20bps lower than the previous month end, at 2.74 per cent.

Global high yield corporate credit, for the fifth-month running saw total negative returns, a 0.36 per cent drop.

Fund performance
In the month of May, the CC Euro High Income Bond Fund lost 1.03 per cent, in line with the widening in spreads within European high yield corporate credit. Throughout the month the Manager continued to seek pockets of value by looking into attractive credit stories while maintaining a low portfolio duration, this to reduce the funds sensitivity to changes in interest rates. During the month the fund reduced its exposure to issue having a high duration, namely perpetual notes issued by CPI Property Group, Vodafone Group, and Banco Santander. Meanwhile, the fund added its exposure to names such as International Game Tech, Tenet Healthcare, Ineos and Kraft Heinz. It is worth highlighting that the portfolio composition is now more of a global nature, following the merger with CC Global High Income Bond Fund.

Market and investment outlook
Going forward the Manager believes that credit markets will largely remain conditioned by monetary decisions taken, thus far proving more hawkish than the economic outlook possibly warrants, altering benchmark yields, now revolving at notable highs. Such upward shift in yields, particularly at the longer-end of the yield curve – influenced by market participants – have on a year-to-date basis weighed on the performance of credit markets. A prudent approach to tackling price pressures is more-than-ever imperative not to hinder growth, and thus worsen the economic situation. A geographical distinction must be made, with the U.S. in a notably better economic prospect, aided by the possible continued consumer spending.  

In terms of bond picking, the Manager will continue to monitor the current unprecedented environment and take opportunities in attractive credit stories which should continue to add value to the portfolio. The recent widening in corporate credit spreads may indeed pose an opportunity, presenting attractive entry points, yielding capital appreciation.  

A quick introduction to our Euro High Income Bond Fund

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Key Facts & Performance

Fund Manager

Jordan Portelli

Jordan is an Investment Manager at Calamatta Cuschieri and is the Head of the Fixed Income desk. Jordan has over 10 years’ experience in High Yield debt. He is a member on a number of Investment Committees and is also a member on the House View Committee of Calamatta Cuschieri. He obtained a Diploma in Business and Management from Cambridge College in the U.K. He also obtained his BSc (Hons) in Economics from the London School of Economics.

PRICE (EUR)

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

€100000

FUND TYPE

UCITS

BASE CURRENCY

EUR

RETURN (SINCE INCEPTION)*

5.16%

*View Performance History below
Inception Date: 24 Apr 2020
ISIN: MT7000026472
Bloomberg Ticker: CCHIBFE MV
Entry Charge: Up to 2.5%
Total Expense Ratio: 1.04%
Exit Charge: None
Distribution Yield (%): 2.75
Underlying Yield (%): 4.90
Distribution: 31/03 and 30/09
Total Net Assets: €41.04 mn
Month end NAV in EUR: 80.05
Number of Holdings: 125
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.
% of Top 10 Holdings: 20.0

Performance To Date (EUR)

Top 10 Holdings

iShares USD High Yield Corp Distr
2.7%
iShares Fallen Angels HY Corp
2.5%
iShares Euro High Yield Corp
2.4%
4% JP Morgan Chase & Co perp
2.2%
Lyxor ESG Euro High Yield
1.9%
4% Chemours Co 2026
1.7%
5.25% HSBC Holdings plc perp
1.7%
5% Tendam Brands SAU 2024
1.6%
5.299% Petrobras Global Fin 2025
1.6%
4.25% Encore Capital Group 2028
1.6%

Major Sector Breakdown*

Financials
13.7%
Funds
9.7%
Asset 7
Communications
9.2%
Industrials
5.9%
Materials
5.1%
Consumer Discretionary
4.3%
*excluding exposures to CIS

Maturity Buckets*

62.3%
0-5 Years
12.3%
5-10 Years
6.4%
10 Years+
*based on the Next Call Date

Credit Ratings*

Average Credit Rating: BB-
*excluding exposures to CIS

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

France
8.3%
Germany
8.0%
Spain
6.0%
Brazil
5.3%
Netherlands
4.0%
Italy
3.4%
Malta
3.1%
Turkey
2.7%
Ireland
2.4%
Mexico
1.5%
*including exposures to CIS

Asset Allocation

Cash 9.3%
Bonds 81.0%
CIS/ETFs 9.7%

Performance History (EUR)*

YTD

-8.92%

2021

1.85%

2020

13.36%

1-month

-0.99%

12-month

-8.32%

Annualised Since Inception***

2.43%

* Data in the chart does not include any dividends distributed since the Fund was launched on 24th April 2020.
** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investorfrom reinvestment of any dividends and additional interest gained through compounding.
*** The Distributor Share Class (Class F) was launched on 24th April 2020. 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.
****Returns quoted net of TER. Entry and exit charges may reduce returns for investors.

Currency Allocation

Euro 63.3%
USD 36.7%
Other 0.0%

Risk Statistics

Sharpe Ratio
-0.18 (3Y)
-0.16 (5Y)
Std. Deviation
8.95% (3Y)
7.16% (5Y)

Interested in this product?

  • Investment Objectives

    The Fund aims to maximise the total level of return for investors by investing, mainly in a diversified portfolio of bonds and other similar debt securities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of corporate & government bonds maturing in the medium term, with an average credit quality of “Ba3” by Moody’s or “BB-” by S&P, although individual bond holdings may have higher or lower ratings. The Fund can also invest up to 10% of its assets in Non-Rated bond issues.

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

  • Investor profile

    A typical investor in the CC High Income Bond Fund Distributor is:

    • Seeking to earn a high level of regular income
    • Seeking an actively managed & diversified investment in high income bonds.
    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

    • The fund may not invest more than 10% of its assets in securities listed by the same body
    • 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 fund
    • The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments
  • Commentary

    May 2022

    Introduction
    Market concerns, notably; lingering key macro-economic risks stemming from the war in Ukraine, monetary policy tightening as central banks continue to grapple with inflation, and a zero-tolerance coronavirus policy leading to stringent restrictions in China – threatening demand and sustaining supply-chain related disruptions, have in May continued to pose as a block to a shift in sentiment. A risk-off mode somewhat persisted, with credit market performance proving somewhat mixed.

    U.S. corporate credit edged higher as treasury yields reversed some of the recent upward moves witnessed at the long-end of the curve, following a slight shift in the Fed’s tone, now seemingly more cautious as risks to growth increased. European credit remained in the red, furthering on the recent month’s negative performance.

    Market environment and performance
    Forward looking indicators, notably PMI data painted a somewhat mixed picture as manufacturing, albeit revised higher from initial estimate of 54.4 to 54.6, maintained its downward trend as new orders fell for the first time since June 2020 while output growth remained sluggish. Services, albeit pointing to the second-fastest expansion since September, edged lower as new business intakes, supported by a renewed increase in new orders from overseas customers, continued to rise.  Owing to a softer service sector expansion amid signs that the post lockdown rebound was losing some strength, the Eurozone Composite PMI fell to a 4-month low of 54.8. Price pressures in the Euro area remained. In May, energy and food prices continued to contribute to a rise in annual inflation; a fresh record high at 8.1 per cent, in-line with expectations and marginally higher than the previous month reading of 7.4 per cent. Core inflation, which excludes transitory or temporary price volatility, rose to 3.8 per cent. Month-on-month, inflation increased by 0.8 per cent.

    Aggregate business activity in the US continued to signal an expansion across the private sector. That said, a softer Composite PMI reading was in May witnessed following softer data in manufacturing and services.  Notably, services came in lower at 53.40 from the previous months reading of 55.60, while manufacturing headed lower to 57.0 from 59.2 in April, pointing to the slowest albeit robust growth in factory activity since January. Annual inflation rate in the US unexpectedly accelerated to 8.6 per cent in May, from 8.3 per cent in the previous month. The reading marked the highest since December 1981 as energy prices rose 34.6 per cent and food costs surged 10.1 per cent. Core inflation, which excludes transitory or temporary price volatility, slowed to 6.0 per cent from 6.2 per cent a month earlier.

    European sovereign yields furthered on the strong upward trajectory witnessed in previous months, heading to the highest in years on expectations of a more aggressive tightening stance by the ECB, aiming to support the currency and taming inflation, in spite of concerns surrounding the Euro area growth outlook, cut to 2.7 per cent this year from the 4.0 per cent predicted earlier in February. Minutes from April’s ECB meeting revealed ECB policymakers’ worries over high inflation and agreement towards a gradual normalisation of monetary policy. After reaching a peak close of 3.13 per cent in the beginning of the month – fuelled by the Fed’s hawkish stance and rate rise by half a point to 0.75-1 per cent during its May meeting – US Treasury yields largely reversed as worries over the outlook for growth and potential to stagnate, in a period of policy tightening continued to weigh on markets. Chair of the Fed Jerome Powell stated that the central bank will not hesitate to keep raising interest rates until inflation falls in a clear and convincing way, even if that involves moving past broadly understood levels of neutral.

    The yield on the 10-year German Bund, closed the month at 1.05 per cent, 12bps higher than the previous month end.  Bond yields of sovereigns within the bloc’s periphery moved in tandem, albeit some rising at somewhat faster pace. The yield on the benchmark 10-year Treasury closed the month 20bps lower than the previous month end, at 2.74 per cent.

    Global high yield corporate credit, for the fifth-month running saw total negative returns, a 0.36 per cent drop.

    Fund performance
    In the month of May, the CC Euro High Income Bond Fund lost 1.03 per cent, in line with the widening in spreads within European high yield corporate credit. Throughout the month the Manager continued to seek pockets of value by looking into attractive credit stories while maintaining a low portfolio duration, this to reduce the funds sensitivity to changes in interest rates. During the month the fund reduced its exposure to issue having a high duration, namely perpetual notes issued by CPI Property Group, Vodafone Group, and Banco Santander. Meanwhile, the fund added its exposure to names such as International Game Tech, Tenet Healthcare, Ineos and Kraft Heinz. It is worth highlighting that the portfolio composition is now more of a global nature, following the merger with CC Global High Income Bond Fund.

    Market and investment outlook
    Going forward the Manager believes that credit markets will largely remain conditioned by monetary decisions taken, thus far proving more hawkish than the economic outlook possibly warrants, altering benchmark yields, now revolving at notable highs. Such upward shift in yields, particularly at the longer-end of the yield curve – influenced by market participants – have on a year-to-date basis weighed on the performance of credit markets. A prudent approach to tackling price pressures is more-than-ever imperative not to hinder growth, and thus worsen the economic situation. A geographical distinction must be made, with the U.S. in a notably better economic prospect, aided by the possible continued consumer spending.  

    In terms of bond picking, the Manager will continue to monitor the current unprecedented environment and take opportunities in attractive credit stories which should continue to add value to the portfolio. The recent widening in corporate credit spreads may indeed pose an opportunity, presenting attractive entry points, yielding capital appreciation.  

  • Key facts & performance

    Fund Manager

    Jordan Portelli

    Jordan is an Investment Manager at Calamatta Cuschieri and is the Head of the Fixed Income desk. Jordan has over 10 years’ experience in High Yield debt. He is a member on a number of Investment Committees and is also a member on the House View Committee of Calamatta Cuschieri. He obtained a Diploma in Business and Management from Cambridge College in the U.K. He also obtained his BSc (Hons) in Economics from the London School of Economics.

    PRICE (EUR)

    ASSET CLASS

    Bonds

    MIN. INITIAL INVESTMENT

    €100000

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    RETURN (SINCE INCEPTION)*

    5.16%

    *View Performance History below
    Inception Date: 24 Apr 2020
    ISIN: MT7000026472
    Bloomberg Ticker: CCHIBFE MV
    Entry Charge: Up to 2.5%
    Total Expense Ratio: 1.04%
    Exit Charge: None
    Distribution Yield (%): 2.75
    Underlying Yield (%): 4.90
    Distribution: 31/03 and 30/09
    Total Net Assets: €41.04 mn
    Month end NAV in EUR: 80.05
    Number of Holdings: 125
    Auditors: Deloitte Malta
    Legal Advisor: Ganado Advocates
    Custodian: Sparkasse Bank Malta p.l.c.
    % of Top 10 Holdings: 20.0

    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 USD High Yield Corp Distr
    2.7%
    iShares Fallen Angels HY Corp
    2.5%
    iShares Euro High Yield Corp
    2.4%
    4% JP Morgan Chase & Co perp
    2.2%
    Lyxor ESG Euro High Yield
    1.9%
    4% Chemours Co 2026
    1.7%
    5.25% HSBC Holdings plc perp
    1.7%
    5% Tendam Brands SAU 2024
    1.6%
    5.299% Petrobras Global Fin 2025
    1.6%
    4.25% Encore Capital Group 2028
    1.6%

    Top Holdings by Country*

    France
    8.3%
    Germany
    8.0%
    Spain
    6.0%
    Brazil
    5.3%
    Netherlands
    4.0%
    Italy
    3.4%
    Malta
    3.1%
    Turkey
    2.7%
    Ireland
    2.4%
    Mexico
    1.5%
    *including exposures to CIS

    Major Sector Breakdown*

    Financials
    13.7%
    Funds
    9.7%
    Asset 7
    Communications
    9.2%
    Industrials
    5.9%
    Materials
    5.1%
    Consumer Discretionary
    4.3%
    *excluding exposures to CIS

    Asset Allocation

    Cash 9.3%
    Bonds 81.0%
    CIS/ETFs 9.7%

    Maturity Buckets*

    62.3%
    0-5 Years
    12.3%
    5-10 Years
    6.4%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    YTD

    -8.92%

    2021

    1.85%

    2020

    13.36%

    1-month

    -0.99%

    12-month

    -8.32%

    Annualised Since Inception***

    2.43%

    * Data in the chart does not include any dividends distributed since the Fund was launched on 24th April 2020.
    ** Performance figures are calculated using the Value Added Monthly Index "VAMI" principle. The VAMI calculates the total return gained by an investorfrom reinvestment of any dividends and additional interest gained through compounding.
    *** The Distributor Share Class (Class F) was launched on 24th April 2020. 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.
    ****Returns quoted net of TER. Entry and exit charges may reduce returns for investors.

    Credit Ratings*

    Average Credit Rating: BB-
    *excluding exposures to CIS

    Currency Allocation

    Euro 63.3%
    USD 36.7%
    Other 0.0%

    Risk Statistics

    Sharpe Ratio
    -0.18 (3Y)
    -0.16 (5Y)
    Std. Deviation
    8.95% (3Y)
    7.16% (5Y)
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