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 “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 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 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.

Below are some rules at a glance, please refer to the offering supplement for full details.

  • 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

April 2024

Introduction

The narrative for credit markets underwent a dramatic shift in April.  Previously anticipating a dovish pivot from the Federal Reserve (Fed), investors were caught off guard by hotter-than-expected inflation data and a first quarter US GDP print that while weak on first-glance, showed resilient private demand. The former reignited concerns about persistent inflation and pushed back expectations for interest rate cuts. The consequence was a swift and significant rise in bond yields, particularly at the belly and longer-end of the maturity spectrum.

This repricing of interest rate expectations had a negative impact on bond prices with a broad sell-off felt across various segments. Generally, government debt and bonds most sensitive to fluctuations in benchmark yields, experienced steeper losses compared with corporate high yield bonds. Propelled by a high correlation, the repricing extended beyond the US with developed market credit in Europe also witnessing yield increases, albeit to a lesser extent. The policy direction in Europe now starkly differs, with the ECB – in its April meeting – laying the groundwork for a potential rate cut in June, acknowledging the disinflationary trend observed in the eurozone. However, the ECB maintained a cautious tone, emphasizing a data-dependent approach. Their monetary policy statement explicitly avoided pre-committing to a specific rate path. This underscores the ECB’s desire to retain flexibility in the face of evolving economic data and the ongoing situation in the global economy.

Market environment and performance

The Eurozone economy continues to present a picture of continued, albeit moderating, recovery. the eurozone economy grew in Q1 with GDP expanding by 0.3% QoQ, following the -0.1% decline in Q4 2023. The German economy rebounded with 0.2% growth after a -0.5% decline in Q4.

Indeed, the Euro area economy moved closer to stabilization in April, Purchasing Managers’ Index (PMI) survey showed, amid a convincing recovery in services (reading 53.3 v 51.5), offsetting the deteriorating manufacturing segment (reading 45.7 v 46.1). Evidence of a two-speed economy. Overall, increased sales supported greater business activity in April. New orders placed with private sector firms in the eurozone rose for the first time since May 2023, albeit only marginally, as a steeper fall in demand for goods partially offset greater new business at services companies. Consequently, employment growth was the sharpest since mid-2023. On the price front, the survey signaled stronger inflationary pressures, with increases observed in both input costs and output charges.

Inflation, a key concern for policy makers, continued to ease. While, headline HICP inflation remained steady at 2.4% YoY in April, in-line with expectations, core prices which exclude volatile food and energy prices, cooled to 2.7% – a 9th successive decline.

The ECB Governing Council, in its April meeting, held the main refinancing operations rate steady at 4.5%, yet opening up the possibility of reducing the level of policy restriction, if the ECB becomes more confident that inflation is moving steadily toward the 2% target. President Lagarde acknowledged that inflation has continued to decline, with most measures of underlying inflation and wage growth easing.

In April, the U.S. economy presented a complex picture. The labour market continued to shine, adding jobs at a steady pace and keeping the unemployment rate at favourable levels. This ongoing strength bodes well for consumer spending and overall economic activity. Inflation – as yet remaining a thorn in the side – headed in the right direction. Notably, annual headline inflation came in marginally lower at 3.4%, compared to March’s 3.5% and in line with forecasts. Core inflation, which excludes volatile items, eased to a three-year low of 3.6%. Other price indicators, notably the leading producer prices MoM figure rose 0.5%, much higher than forecasts of 0.3%.

In April, Government bond yields rose, meaning prices fell as the rise in inflation and strong jobs market meant investors pushed back their expected timeline for an interest rate cut from the Fed. Accordingly, the US led the sell-off in sovereign bonds, with the benchmark 10-year Treasury yield hitting the highest level (4.70%) since late 2023. Corporate credit, aided by the inherent characteristics of the asset class, outperformed. However, varying geographically with European corporate credit displaying greater resilience compared to its US counterparts. Indeed, European investment grade debt experienced a modest decline of c. 0.83%, outperforming its US equivalent.  Even more notable were European high yield bonds, which managed to hold steady throughout the month, essentially delivering a flat return (0.00%).

Fund performance

The CC High Income Bond Fund closed the month lower (-0.74) from the previous month’s close, amid a negative performance observed across credit markets.

The manager, in line with its mandate, maintained an active approach to managing the portfolio. Throughout the month, the manager – aiming to increase the portfolio’s duration in a gradual manner and exposure to European exposure – continued to take advantage of selective opportunities, primarily by participating in initial offerings. Indeed, the month saw a number of market participants coming to market, with liquidity and appetite certainly increasing. Credit issuers which the CC High Income Bond Fund increased its exposure to include; Dufry, Schaeffler AG, Flutter Entertainment, Carnival Corp, and Mundy’s.

Market and investment outlook

The initial months of 2024 witnessed a semblance of policy alignment between the US Federal Reserve and the European Central Bank (ECB). However, this harmony dissipated in April as economic data presented a more nuanced picture. The Fed, facing persistent inflation and a strong labor market, revised growth forecasts upwards, fueling expectations for prolonged high rates.  The ECB, however, confronts a more complex picture. Key economies within the single currency bloc, traditionally acting as growth engines, began to experience a slowdown, offsetting any potential upturn in the rest of the region. This uneven economic picture, coupled with the moderating inflation trend, has pushed the ECB towards a more dovish stance. A potential rate cut in June is now increasingly plausible for the ECB. However, the precise timing and magnitude of easing thereafter remains shrouded in uncertainty.

Fixed income, for years losing its appeal – given the relatively low-yielding environment – has become more attractive. Indeed, locking in coupons at such comparably favorable levels, ahead of any policy easing, is key.  

That said, the manager will going forward 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, gradually increase duration and strategic tilt towards European credit. Our rationale for this shift lies in Europe’s earlier stage in the credit cycle, potentially offering upside potential. Additionally, the dovish stance of the ECB, compared to its Western counterparts, raises the possibility of Europe being the first to cut interest rates, which could further benefit European credit markets.

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: 24 Apr 2020
ISIN: MT7000026472
Bloomberg Ticker: CCHIBFE MV
Distribution Yield (%): 3.75
Underlying Yield (%): 5.27
Distribution: 31/03 and 30/09
Total Net Assets: €48.80 mn
Month end NAV in EUR: 79.95
Number of Holdings: 132
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

iShares Fallen Angels HY Corp
2.7%
4% JP Morgan Chase & Co perp
2.4%
7.5% Nidda Healthcare Holding 2026
2.0%
8.156% Encore Capital Group 2028
1.8%
iShares USD High Yield Corp
1.8%
3.875% Allwyn International 2027
1.8%
iShares Euro High Yield Corp
0.8%
2.5% Hapag-Lloyd AG 2028
1.7%
4.625% Volkswagen perp
1.6%
3.5% Eircom Finance DAC 2026
1.6%

Major Sector Breakdown*

Financials
12.7%
Asset 7
Communications
8.9%
Consumer Discretionary
8.2%
Health Care
7.6%
Funds
6.4%
Industrials
4.3%
*excluding exposures to CIS

Maturity Buckets*

72.7%
0-5 Years
15.4%
5-10 Years
2.2%
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*

United States
24.5%
Germany
11.7%
France
9.8%
Italy
5.4%
Spain
5.4%
Brazil
4.5%
Netherlands
3.8%
Czech Republic
2.9%
Turkey
2.6%
Malta
2.5%
*including exposures to CIS

Asset Allocation

Cash 3.4%
Bonds 90.2%
CIS/ETFs 6.4%

Performance History (EUR)*

1 Year

7.05%

3 Year

-1.45%

* 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 65.5%
USD 34.5%
Other 0.0%

Risk Statistics

Sharpe Ratio
-0.84 (3Y)
-0.45 (5Y)
Std. Deviation
5.19% (3Y)
7.75% (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 “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 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

    April 2024

    Introduction

    The narrative for credit markets underwent a dramatic shift in April.  Previously anticipating a dovish pivot from the Federal Reserve (Fed), investors were caught off guard by hotter-than-expected inflation data and a first quarter US GDP print that while weak on first-glance, showed resilient private demand. The former reignited concerns about persistent inflation and pushed back expectations for interest rate cuts. The consequence was a swift and significant rise in bond yields, particularly at the belly and longer-end of the maturity spectrum.

    This repricing of interest rate expectations had a negative impact on bond prices with a broad sell-off felt across various segments. Generally, government debt and bonds most sensitive to fluctuations in benchmark yields, experienced steeper losses compared with corporate high yield bonds. Propelled by a high correlation, the repricing extended beyond the US with developed market credit in Europe also witnessing yield increases, albeit to a lesser extent. The policy direction in Europe now starkly differs, with the ECB – in its April meeting – laying the groundwork for a potential rate cut in June, acknowledging the disinflationary trend observed in the eurozone. However, the ECB maintained a cautious tone, emphasizing a data-dependent approach. Their monetary policy statement explicitly avoided pre-committing to a specific rate path. This underscores the ECB’s desire to retain flexibility in the face of evolving economic data and the ongoing situation in the global economy.

    Market environment and performance

    The Eurozone economy continues to present a picture of continued, albeit moderating, recovery. the eurozone economy grew in Q1 with GDP expanding by 0.3% QoQ, following the -0.1% decline in Q4 2023. The German economy rebounded with 0.2% growth after a -0.5% decline in Q4.

    Indeed, the Euro area economy moved closer to stabilization in April, Purchasing Managers’ Index (PMI) survey showed, amid a convincing recovery in services (reading 53.3 v 51.5), offsetting the deteriorating manufacturing segment (reading 45.7 v 46.1). Evidence of a two-speed economy. Overall, increased sales supported greater business activity in April. New orders placed with private sector firms in the eurozone rose for the first time since May 2023, albeit only marginally, as a steeper fall in demand for goods partially offset greater new business at services companies. Consequently, employment growth was the sharpest since mid-2023. On the price front, the survey signaled stronger inflationary pressures, with increases observed in both input costs and output charges.

    Inflation, a key concern for policy makers, continued to ease. While, headline HICP inflation remained steady at 2.4% YoY in April, in-line with expectations, core prices which exclude volatile food and energy prices, cooled to 2.7% – a 9th successive decline.

    The ECB Governing Council, in its April meeting, held the main refinancing operations rate steady at 4.5%, yet opening up the possibility of reducing the level of policy restriction, if the ECB becomes more confident that inflation is moving steadily toward the 2% target. President Lagarde acknowledged that inflation has continued to decline, with most measures of underlying inflation and wage growth easing.

    In April, the U.S. economy presented a complex picture. The labour market continued to shine, adding jobs at a steady pace and keeping the unemployment rate at favourable levels. This ongoing strength bodes well for consumer spending and overall economic activity. Inflation – as yet remaining a thorn in the side – headed in the right direction. Notably, annual headline inflation came in marginally lower at 3.4%, compared to March’s 3.5% and in line with forecasts. Core inflation, which excludes volatile items, eased to a three-year low of 3.6%. Other price indicators, notably the leading producer prices MoM figure rose 0.5%, much higher than forecasts of 0.3%.

    In April, Government bond yields rose, meaning prices fell as the rise in inflation and strong jobs market meant investors pushed back their expected timeline for an interest rate cut from the Fed. Accordingly, the US led the sell-off in sovereign bonds, with the benchmark 10-year Treasury yield hitting the highest level (4.70%) since late 2023. Corporate credit, aided by the inherent characteristics of the asset class, outperformed. However, varying geographically with European corporate credit displaying greater resilience compared to its US counterparts. Indeed, European investment grade debt experienced a modest decline of c. 0.83%, outperforming its US equivalent.  Even more notable were European high yield bonds, which managed to hold steady throughout the month, essentially delivering a flat return (0.00%).

    Fund performance

    The CC High Income Bond Fund closed the month lower (-0.74) from the previous month’s close, amid a negative performance observed across credit markets.

    The manager, in line with its mandate, maintained an active approach to managing the portfolio. Throughout the month, the manager – aiming to increase the portfolio’s duration in a gradual manner and exposure to European exposure – continued to take advantage of selective opportunities, primarily by participating in initial offerings. Indeed, the month saw a number of market participants coming to market, with liquidity and appetite certainly increasing. Credit issuers which the CC High Income Bond Fund increased its exposure to include; Dufry, Schaeffler AG, Flutter Entertainment, Carnival Corp, and Mundy’s.

    Market and investment outlook

    The initial months of 2024 witnessed a semblance of policy alignment between the US Federal Reserve and the European Central Bank (ECB). However, this harmony dissipated in April as economic data presented a more nuanced picture. The Fed, facing persistent inflation and a strong labor market, revised growth forecasts upwards, fueling expectations for prolonged high rates.  The ECB, however, confronts a more complex picture. Key economies within the single currency bloc, traditionally acting as growth engines, began to experience a slowdown, offsetting any potential upturn in the rest of the region. This uneven economic picture, coupled with the moderating inflation trend, has pushed the ECB towards a more dovish stance. A potential rate cut in June is now increasingly plausible for the ECB. However, the precise timing and magnitude of easing thereafter remains shrouded in uncertainty.

    Fixed income, for years losing its appeal – given the relatively low-yielding environment – has become more attractive. Indeed, locking in coupons at such comparably favorable levels, ahead of any policy easing, is key.  

    That said, the manager will going forward 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, gradually increase duration and strategic tilt towards European credit. Our rationale for this shift lies in Europe’s earlier stage in the credit cycle, potentially offering upside potential. Additionally, the dovish stance of the ECB, compared to its Western counterparts, raises the possibility of Europe being the first to cut interest rates, which could further benefit European credit markets.

  • 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: 24 Apr 2020
    ISIN: MT7000026472
    Bloomberg Ticker: CCHIBFE MV
    Distribution Yield (%): 3.75
    Underlying Yield (%): 5.27
    Distribution: 31/03 and 30/09
    Total Net Assets: €48.80 mn
    Month end NAV in EUR: 79.95
    Number of Holdings: 132
    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 Fallen Angels HY Corp
    2.7%
    4% JP Morgan Chase & Co perp
    2.4%
    7.5% Nidda Healthcare Holding 2026
    2.0%
    8.156% Encore Capital Group 2028
    1.8%
    iShares USD High Yield Corp
    1.8%
    3.875% Allwyn International 2027
    1.8%
    iShares Euro High Yield Corp
    0.8%
    2.5% Hapag-Lloyd AG 2028
    1.7%
    4.625% Volkswagen perp
    1.6%
    3.5% Eircom Finance DAC 2026
    1.6%

    Top Holdings by Country*

    United States
    24.5%
    Germany
    11.7%
    France
    9.8%
    Italy
    5.4%
    Spain
    5.4%
    Brazil
    4.5%
    Netherlands
    3.8%
    Czech Republic
    2.9%
    Turkey
    2.6%
    Malta
    2.5%
    *including exposures to CIS

    Major Sector Breakdown*

    Financials
    12.7%
    Asset 7
    Communications
    8.9%
    Consumer Discretionary
    8.2%
    Health Care
    7.6%
    Funds
    6.4%
    Industrials
    4.3%
    *excluding exposures to CIS

    Asset Allocation

    Cash 3.4%
    Bonds 90.2%
    CIS/ETFs 6.4%

    Maturity Buckets*

    72.7%
    0-5 Years
    15.4%
    5-10 Years
    2.2%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    1 Year

    7.05%

    3 Year

    -1.45%

    * 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 65.5%
    USD 34.5%
    Other 0.0%

    Risk Statistics

    Sharpe Ratio
    -0.84 (3Y)
    -0.45 (5Y)
    Std. Deviation
    5.19% (3Y)
    7.75% (5Y)
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