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 Class B (Dist) Investor Shares in USD 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

August 2022

Introduction
Economic data prints have in August continued to illustrate somewhat of a mixed landscape as the labour market remained strong amid worsening macro conditions. Forward looking indicators, namely Purchasing Manager Index (PMI) readings – albeit proving to be generally slightly better than expected – showed activity losing momentum as demand waned while inflation remained at notable highs.

The recently witnessed upward momentum across financial markets, floundered. Central Banks’ commitment to bring inflation under control despite such inherent risks to the growth outlook, observed in Jerome Powell’s speech at the annual Jackson Hole Economic Symposium, drove markets lower rattling bond markets. Consequent to such shift in rhetoric, one that is more hawkish, fed funds futures market started to price in a near 75% probability of a 0.75% increase.

The US 10-year benchmark treasury yield has over the month, on fears of a worsening growth outlook, rose sharply to 3.19%. Such upward moves led to negative returns for both investment grade and high yield corporate credit. Emerging Market (EM) and European high yield credit all-in-all outperformed.

Market environment and performance

Forward looking indicators, namely PMIs have continued to paint a somewhat gloomy picture as manufacturing and services, noted a sharp deterioration in the rate of growth, pointing to a second successive contraction in activity. In August, manufacturing (reading 49.6) shrank fell at a similar pace to that seen in July, which was the strongest since May 2020. New orders declined sharply once again. Services, for the first time this year revolved in contractionary territory, as August’s reading came in at 49.8, lower than a preliminary of 50.2. Pressured by elevated energy costs and the continued acceleration in food prices and services, inflationary pressures persisted. In August, annual inflation rate increased to a new record high of 9.1%. Core inflation, which excludes transitory or temporary price volatility, increased to a record high of 4.3% from 4% in the previous month.

Aggregate business activity in the US pointed to a solid contraction across the private sector. Notably, composite PMI reading in August fell to 45 from 47.7 in July as a notable contraction across the services sector was observed. Business conditions in manufacturing worsened. Notably, signalling the sharpest contraction since May 2020 as interest rate hikes and persistently-high inflation dampened customer spending. Annual inflation rate in the US had in July eased to 8.5%. Month-on-month, consumer prices remained unchanged in July following a 1.3% rise in the previous month. From the employment front; the non-farm payrolls print showed that 315k jobs were created in August compared to market expectations of 300k, wage growth rose at somewhat slower rate and unemployment rate, against expectations of 3.5% rose to 3.7%, the highest since February. Meanwhile, the labour force participation rate increased to a five-month high of 62.4% from 62.1% in July.

Fears amongst central bankers that persistently-high inflation may have possibly become embedded and will therefore last longer than previously envisaged, impacting consumer’s purchasing power and thus demand, became more pronounced in the month. Despite the inherent risks to the growth outlook and himself signalling caution and reliance on data a few weeks earlier, Chair of the Federal Reserve Jerome Powell, at the Jackson Hole Economic Symposium – an annual gathering of central bankers focusing on important economic issues that world economies face – shifted his tone, more aligned to some of the more hawkish members within the Federal Open Market Committee (FOMC).

July’s relief witnessed across financial markets was shortly lived as mounting concerns over the economic outlook remained. A risk-off mode transpired. Global high yield corporate credit saw a loss of 1.17%. On a year-to-date, performance remains in the red at -11.92%.

Fund performance
In the month of August, the CC High Income Bond Fund saw a loss of 0.52%, in line with the widening in spreads within global high yield corporate credit. Throughout the month the Manager maintained its more recent allocation, after reducing its cash position in the previous month. Also, the Manager sought pockets of value by looking into attractive credit stories, previously conditioned by the spread widening observed. Some of the names the fund increased its exposure to include; Loxam, Tendam, Dufry, and Crown Holdings.

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, substantially altering benchmark yields which remain largely elevated, particularly as recessionary fears intensified. Such upward shift in yields, at the short-end (influenced by monetary policy decisions taken) and long-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 now more-than-ever imperative not to hinder growth, and thus worsen the economic situation. A geographical distinction remains, with the U.S. in a notably better economic prospect, aided by the possible continued consumer spending which however is at peril as savings continue to decline and revolve below pre-pandemic averages. A 75bps interest rate hike at the next rate-setting committee meeting in September is indeed plausible. Although a rate hike by the ECB is indeed at table, the situation in Europe largely contrasts with pricing pressures remaining elevated and energy crisis looming, as countries remain at the mercy of Russian meddling with its natural resources.

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. Widening in corporate credit spreads have indeed posed opportunities, presenting attractive entry points, which are yielding capital appreciation. That being said, a somewhat cautious approach is as things stand warranted.

A quick introduction to our High Income Bond Fund

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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 (USD)

$

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

$2500

FUND TYPE

UCITS

BASE CURRENCY

USD

RETURN (SINCE INCEPTION)*

-0.73%

*View Performance History below
Inception Date: 21 May 2022
ISIN: MT7000030920
Bloomberg Ticker: CCHIBNC MV
Entry Charge: Up to 2.5%
Total Expense Ratio: 1.49%
Exit Charge: None
Distribution Yield (%): 2.75
Underlying Yield (%): 5.13
Distribution: 31/03 & 30/09
Total Net Assets: 53.89 mn
Month end NAV in USD: 75.81
Number of Holdings: 125
Auditors: Deloitte Malta
Legal Advisor: Ganado & Associates
Custodian: Sparkasse Bank Malta p.l.c.
% of Top 10 Holdings: 20.0

Performance To Date (USD)

Top 10 Holdings

iShares USD High Yield Corp Distr
2.8%
4% JP Morgan Chase & Co perp
2.4%
iShares Fallen Angels HY Corp
2.4%
iShares Euro HY Corp
2.3%
Lyxor ESG Euro HY
1.8%
5.25% HSBC Holdings plc perp
1.7%
5.299% Petrobras Global Fin 2025
1.7%
5% Tendam Brands SAU 2024
1.7%
4.25% Encore Capital Group Inc 2028
1.6%
2.5% Hapag-Lloyd AG 2028
1.6%

Major Sector Breakdown*

Funds
9.5%
Asset 7
Communications
9.3%
Industrials
6.3%
Materials
4.5%
Materials
4.5%
Health Care
3.9%
*excluding exposures to CIS

Maturity Buckets*

72.9%
0-5 Years
7.2%
5-10 Years
2.0%
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
8.1%
Germany
8.1%
Spain
6.4%
Brazil
5.6%
Netherlands
4.0%
Malta
3.1%
Turkey
2.9%
Italy
2.4%
Ireland
2.4%
Mexico
1.5%
*including exposures to CIS

Asset Allocation

Cash 7.4%
Bonds 83.1%
CIS/ETFs 9.5%

Performance History (EUR)*

YTD

-10.89%

2021

1.48%

2020

-0.15%

2019

7.47%

2018

-6.44%

Annualised Since Inception***

2.08%

* The chart data and performance history show the simlated performance for the new share class C (Distributor), based on the performance of the share class D (Distributor) of the High Income Bond Fund which was launched on 0 September 2011. The investment objectives and policies and also the Risk and Reward Profile of both share classes are substantially similar.
** 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.
*** 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 62.2%
USD 37.8%
Other 0.0%

Risk Statistics

Sharpe Ratio
-0.33 (3Y)
-0.28 (5Y)
Std. Deviation
9.00% (3Y)
7.24% (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 Class B (Dist) Investor Shares in USD 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

    August 2022

    Introduction
    Economic data prints have in August continued to illustrate somewhat of a mixed landscape as the labour market remained strong amid worsening macro conditions. Forward looking indicators, namely Purchasing Manager Index (PMI) readings – albeit proving to be generally slightly better than expected – showed activity losing momentum as demand waned while inflation remained at notable highs.

    The recently witnessed upward momentum across financial markets, floundered. Central Banks’ commitment to bring inflation under control despite such inherent risks to the growth outlook, observed in Jerome Powell’s speech at the annual Jackson Hole Economic Symposium, drove markets lower rattling bond markets. Consequent to such shift in rhetoric, one that is more hawkish, fed funds futures market started to price in a near 75% probability of a 0.75% increase.

    The US 10-year benchmark treasury yield has over the month, on fears of a worsening growth outlook, rose sharply to 3.19%. Such upward moves led to negative returns for both investment grade and high yield corporate credit. Emerging Market (EM) and European high yield credit all-in-all outperformed.

    Market environment and performance

    Forward looking indicators, namely PMIs have continued to paint a somewhat gloomy picture as manufacturing and services, noted a sharp deterioration in the rate of growth, pointing to a second successive contraction in activity. In August, manufacturing (reading 49.6) shrank fell at a similar pace to that seen in July, which was the strongest since May 2020. New orders declined sharply once again. Services, for the first time this year revolved in contractionary territory, as August’s reading came in at 49.8, lower than a preliminary of 50.2. Pressured by elevated energy costs and the continued acceleration in food prices and services, inflationary pressures persisted. In August, annual inflation rate increased to a new record high of 9.1%. Core inflation, which excludes transitory or temporary price volatility, increased to a record high of 4.3% from 4% in the previous month.

    Aggregate business activity in the US pointed to a solid contraction across the private sector. Notably, composite PMI reading in August fell to 45 from 47.7 in July as a notable contraction across the services sector was observed. Business conditions in manufacturing worsened. Notably, signalling the sharpest contraction since May 2020 as interest rate hikes and persistently-high inflation dampened customer spending. Annual inflation rate in the US had in July eased to 8.5%. Month-on-month, consumer prices remained unchanged in July following a 1.3% rise in the previous month. From the employment front; the non-farm payrolls print showed that 315k jobs were created in August compared to market expectations of 300k, wage growth rose at somewhat slower rate and unemployment rate, against expectations of 3.5% rose to 3.7%, the highest since February. Meanwhile, the labour force participation rate increased to a five-month high of 62.4% from 62.1% in July.

    Fears amongst central bankers that persistently-high inflation may have possibly become embedded and will therefore last longer than previously envisaged, impacting consumer’s purchasing power and thus demand, became more pronounced in the month. Despite the inherent risks to the growth outlook and himself signalling caution and reliance on data a few weeks earlier, Chair of the Federal Reserve Jerome Powell, at the Jackson Hole Economic Symposium – an annual gathering of central bankers focusing on important economic issues that world economies face – shifted his tone, more aligned to some of the more hawkish members within the Federal Open Market Committee (FOMC).

    July’s relief witnessed across financial markets was shortly lived as mounting concerns over the economic outlook remained. A risk-off mode transpired. Global high yield corporate credit saw a loss of 1.17%. On a year-to-date, performance remains in the red at -11.92%.

    Fund performance
    In the month of August, the CC High Income Bond Fund saw a loss of 0.52%, in line with the widening in spreads within global high yield corporate credit. Throughout the month the Manager maintained its more recent allocation, after reducing its cash position in the previous month. Also, the Manager sought pockets of value by looking into attractive credit stories, previously conditioned by the spread widening observed. Some of the names the fund increased its exposure to include; Loxam, Tendam, Dufry, and Crown Holdings.

    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, substantially altering benchmark yields which remain largely elevated, particularly as recessionary fears intensified. Such upward shift in yields, at the short-end (influenced by monetary policy decisions taken) and long-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 now more-than-ever imperative not to hinder growth, and thus worsen the economic situation. A geographical distinction remains, with the U.S. in a notably better economic prospect, aided by the possible continued consumer spending which however is at peril as savings continue to decline and revolve below pre-pandemic averages. A 75bps interest rate hike at the next rate-setting committee meeting in September is indeed plausible. Although a rate hike by the ECB is indeed at table, the situation in Europe largely contrasts with pricing pressures remaining elevated and energy crisis looming, as countries remain at the mercy of Russian meddling with its natural resources.

    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. Widening in corporate credit spreads have indeed posed opportunities, presenting attractive entry points, which are yielding capital appreciation. That being said, a somewhat cautious approach is as things stand warranted.

  • 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 (USD)

    $

    ASSET CLASS

    Bonds

    MIN. INITIAL INVESTMENT

    $2500

    FUND TYPE

    UCITS

    BASE CURRENCY

    USD

    RETURN (SINCE INCEPTION)*

    -0.73%

    *View Performance History below
    Inception Date: 21 May 2022
    ISIN: MT7000030920
    Bloomberg Ticker: CCHIBNC MV
    Entry Charge: Up to 2.5%
    Total Expense Ratio: 1.49%
    Exit Charge: None
    Distribution Yield (%): 2.75
    Underlying Yield (%): 5.13
    Distribution: 31/03 & 30/09
    Total Net Assets: 53.89 mn
    Month end NAV in USD: 75.81
    Number of Holdings: 125
    Auditors: Deloitte Malta
    Legal Advisor: Ganado & Associates
    Custodian: Sparkasse Bank Malta p.l.c.
    % of Top 10 Holdings: 20.0

    Performance To Date (USD)

    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
    2.8%
    4% JP Morgan Chase & Co perp
    2.4%
    iShares Fallen Angels HY Corp
    2.4%
    iShares Euro HY Corp
    2.3%
    Lyxor ESG Euro HY
    1.8%
    5.25% HSBC Holdings plc perp
    1.7%
    5.299% Petrobras Global Fin 2025
    1.7%
    5% Tendam Brands SAU 2024
    1.7%
    4.25% Encore Capital Group Inc 2028
    1.6%
    2.5% Hapag-Lloyd AG 2028
    1.6%

    Top Holdings by Country*

    France
    8.1%
    Germany
    8.1%
    Spain
    6.4%
    Brazil
    5.6%
    Netherlands
    4.0%
    Malta
    3.1%
    Turkey
    2.9%
    Italy
    2.4%
    Ireland
    2.4%
    Mexico
    1.5%
    *including exposures to CIS

    Major Sector Breakdown*

    Funds
    9.5%
    Asset 7
    Communications
    9.3%
    Industrials
    6.3%
    Materials
    4.5%
    Materials
    4.5%
    Health Care
    3.9%
    *excluding exposures to CIS

    Asset Allocation

    Cash 7.4%
    Bonds 83.1%
    CIS/ETFs 9.5%

    Maturity Buckets*

    72.9%
    0-5 Years
    7.2%
    5-10 Years
    2.0%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    YTD

    -10.89%

    2021

    1.48%

    2020

    -0.15%

    2019

    7.47%

    2018

    -6.44%

    Annualised Since Inception***

    2.08%

    * The chart data and performance history show the simlated performance for the new share class C (Distributor), based on the performance of the share class D (Distributor) of the High Income Bond Fund which was launched on 0 September 2011. The investment objectives and policies and also the Risk and Reward Profile of both share classes are substantially similar.
    ** 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.
    *** 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 62.2%
    USD 37.8%
    Other 0.0%

    Risk Statistics

    Sharpe Ratio
    -0.33 (3Y)
    -0.28 (5Y)
    Std. Deviation
    9.00% (3Y)
    7.24% (5Y)
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