Global Opportunities Fund Institutional

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 funds
• The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments

August 2021

Since first detected in January 2020, the coronavirus pandemic and ensuing global response have dictated economic activity and markets way forward. Markets initially headed significantly lower as the economic landscape, following the imposition of movement restrictions, deteriorated. However, a concerted effort by both Central banks and governments led to what we are witnessing today – a robust economic recovery and upward trajectory in financial markets. 

From an economic viewpoint, the path towards a full recovery, proved bumpier than previously anticipated. A vaccination drive taking long to pick-up speed along with a more severe wave of infections, lessened the pace of the recovery. The outlook, albeit currently faced with a slowdown in growth and a rapid increase in infections, seems benevolent.

The Delta variant, first originated in India and considered to be significantly more transmissible than previous strains, is said to be behind the recent rapid rise in infections. Countries witnessing a rise in infection rate, led their authorities to re-think their way forward, with some resorting to a re-introduction of restrictive measures. Some, also announced booster programmes to deliver third doses to their population.

The Federal Reserve’s (Fed) annual Jackson Hole symposium was highly anticipated. Jerome Powell struck a cautious note in his statement, stating that while the US economy had made progress on some important targets, particularly on inflation, tapering too aggressively may derail progress at a sensitive time, reiterating a desire to see further progress in the labour market. Although broadly perceived as dovish (supporting low-interest rates and an expansionary monetary policy), Powell’s comments were in-line with expectations that tapering could begin this year. The boost to sentiment overshadowed worries over Hurricane Ida and the Delta variant.

Although the developed market world appears to be at or just past the peak rate of growth, economic data has largely remained positive.

In August, aggregate business activity in the U.S., as measured by the Composite Purchasing Managers Index (PMI), was confirmed at 55.4, down from July’s 59.9. The rate of expansion was the softest in 2021 amid a slower overall upturn stemmed from weaker expansions in the manufacturing and service sectors.

Annual inflation rate in the U.S. remained steady at 5.4 per cent. In 2021, inflation has largely been on the rise amid low base effects from an unprecedented 2020 and as the economic recovery picks up, restrictions ease, and demand surges amid widespread vaccination programmes and fiscal support. Month-on-month, the Consumer Price Index (CPI) increased by 0.5 per cent on a seasonally adjusted basis after rising 0.9 per cent in June. 

In regard to the labour market, the US economy added 235,000 jobs in August of 2021, the lowest in 7 months and significantly below forecasts of 750,000. A surge in Coronavirus infections is said to may have discouraged companies from hiring and workers from actively seeking employment. August’s jobs report saw wages rise by 0.6% month over month.

In August, both European and U.S. equities ended the month higher, albeit witnessing some volatility. Jerome Powell’s cautious approach at the annual Jackson Hole symposium, pointing towards continued economic support, steered markets higher. The S&P 500 gained 3.04 per cent while the NASDAQ – having a larger tilt towards the technology sector, generated a 4.09 per cent total return. Meanwhile in Europe, the EuroStoxx 50 and the DAX rose 2.63 and 1.87 per cent, respectively, as vaccination campaigns and easing of coronavirus vaccinations continued to accelerate. The coronavirus vaccination programmes in Europe have seemingly gained track. Generally, vaccination rates across Europe have surpassed the US and the UK, the latter being among the first to initiate its vaccination programme.

In the month of August, the CC Global Opportunities Fund increased by 1.53 per cent. On a year-to-date basis, the sub-fund generated a total return of 15.32 per cent. Throughout the month the Manager continued to seek pockets of value by looking into attractive equity stories.

The Investment Manager believes that equities should do well in an environment of modestly rising inflation, as rising sales tend to offset higher input prices, which can be passed onto customers when demand is strong. Looking for areas within equity markets that stand to benefit both from the cyclical rebound is imperative. Value sectors usually fit the bill in that respect. Overall, equities have had a strong start to the year, and while we wouldn’t be surprised to see a few wobbles along the way conditioned by the Delta variant, we believe the outlook remains relatively largely positive. We remain very mindful that certain value trades will take longer to materialise as Covid-19 cases increases. To this end, close monitoring and possible tweaks in allocation are imperative, depending on market conditions.