Investment Objectives

The Fund aims to deliver a positive total return in any three year period from a flexibly managed portfolio of global assets whilst maintaining a monthly VaR with a 99% confidence interval at or below 5% at all times. The Investment Manager shall invest primarily in a diversified portfolio across a wide spectrum of industries and sectors primarily via bonds, equities and eligible ETFs. Investment in these asset classes either directly or indirectly through UCITS Funds and/ or eligible non UCITS Funds.

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

The Fund is classified under Article 6 of the SFDR meaning that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

Investor Profile

Fund Rules

Commentary

January 2024

Introduction

In January, markets continued from where they left off at the end of last year as equities continued delivering above-average performances in spite of the realization that the elusive March interest rate cut will not happen. This was mostly due to the excellent performance of the US economy in the last quarter of 2023, as it posted an annualised growth of 3.3%, exceeding analysts’ estimates of 3.1%. The resilience of the US labour market and the resilience of the US consumer have construed to the goldilocks environment where the US economy finds itself currently, a place where other economies struggle to catch-up. Only Japan seems to be getting another economic lifeline as the last decade of Abenomics finally managed to trigger inflation which in turn reflected into the local equity market which registered a multi-decade high. China, on the other hand, is stuck in a disinflationary environment as the construction sector debacle looks to be having a long-lasting negative impact on the local consumer, while the Communist authorities would rather have a natural normalization of the economic cycle than pushing for another round of sector-directed subsidies with the potential of future economic distortions and social imbalances. The recent local equity markets slump which reminds of the fundamental boom and bust profile of capital markets in China puts another layer of uncertainty as regards the interest of market participants in the second world economy and its viability as an investment for the world outside. Consequently, the investable universe becomes more concentrated for the time being, therefore riskier in the absence of diversification options. As the US elections season approaches, such context could only get more extreme.

From the monetary front, the FED kept rates unchanged indicating they won’t reduce rates until inflation moves sustainably towards a desirable level. Chair Powell stated that it will be appropriate to begin reducing rates sometimes this year, emphasizing a meeting-by-meeting approach. A March cut is thus unlikely at this point. In Europe, the ECB maintained record-high interest rates and pledged to keep them restrictive until inflation reaches its 2% target, despite concerns about a looming recession and easing price pressures. President Lagarde noted that officials unanimously concurred that it was premature to engage in discussions regarding interest rate cuts.

Equity markets have continued pushing upward in the month as an initial breather in the first days of the year have been more than recovered as the earnings season kicked in discovering a very lucrative holidays season for the corporate sector. Market internals seem to having depreciated once again. While in recent months we have seen a reversal of the recovery story from October 2022 from this regard, as market breath have generally broadened, value stocks recovered versus their growth peers and the mega caps reduced their dominance in terms of market performance, in January trends have taken into reverse again. On top of it, market volatility has again subsided leaving room for complacency among market participants, as markets were again being led by the AI theme and the Magnificent 7 (with the notable exception of Tesla). For the time being this somewhat begs for a market pullback, but from a broader view it moves the markets into a more unstable environment, where indexes concentration hits historical levels and growth assumptions implied by current valuation multiples defy gravitation. Maybe it’s time to remember another old-time adage from options investing – “picking up pennies in front of a steamroller”.

Market Environment and Performance

January’s Purchasing Managers’ Index (PMI) indicators showed an positive evolution in the Euro area economy, amid an improvement in manufacturing (reading 46.6 versus the previous month reading of 44.4) and a slowdown in services (reading of 48.4 versus a previous month reading of 48.8). Overall, the contraction in business activity softened while growth expectations strengthened to a nine-month high. Inflationary pressures returned to their downward trajectory to 2.8% from the uptick to 2.9% in December. Core inflation too eased to 3.3% from 3.4% in the previous month, above forecasts but still reaching its lowest level since March 2022.

In the U.S., economic indicators continued portraying a relative level of robustness compared to its developed market peers. In January the industrial activity as measured by the latest PMI signalled a modest uptick (reading of 52.0 versus a previous month reading of 50.9). Optimism regarding the outlook for output over the next year improved too, as business continued expanding their staffing numbers. Annual rate of inflation in the US fell back to 3.1% in January following a brief increase to 3.4%, but came higher than forecasts of 2.9%. Core inflation which excludes volatile items such as food and energy held steady at 3.9%, compared to expectations it would slow to 3.7%.

Equity markets have continued rallying into the new year on the back of a surprisingly strong earnings season debut and continuous hopes of even more accommodative financial conditions defining the market environment going forward. By the end of the month, the much-anticipated positive numbers and guidelines offered by mega caps management have led the markets higher towards new all-time highs. Statistically, a very strong January performance as this time around does brighten the expectations for the overall yearly performance. The S&P 500 index gained 3.59% supported by an uptick in aggregate earnings growth from the Magnificent Seven and a revival in the healthcare space. European markets rose in line with the global trends themselves being led by good earnings from the main index members as the EuroStoxx50 and the DAX gained 2.81% and only 0.91% respectively, with technology and financial names outperforming other sectors.

Credit was by large conditioned by the disconnection of markets versus central banks’ chatter, with the 10-year US Treasury yield rose above 4.10%. German Bunds too saw yields rise above 2.30%, yet retreated back to 2.17% at month-end. The riskier segment outperformed investment grade bonds with Euro HY gaining 0.88%, while global HY trading sideways.

Fund Performance

In the month of January the Solid Future Defensive Fund registered a 0.86 per cent gain. On the equity allocation, the Fund’s allocation has been readjusted during the month, as the Manager decided aligned it to new fundamental views. New conviction names Pfizer and Eli Lilly have been added based on compelling fundamental factors and interesting risk-adjusted entry levels following protracted recent underperformances in the first case and a strong momentum in the second case. As well, positions have been initiated in the iShares US Property Yield UCITS ETF, Xtrackers MSCI Japan UCITS ETF and WisdomTree Artificial Intelligence ETF all based on fundamental themes which the Manager believes will outperform this year. Positions in Ahold Delhaize, Vinci SA and Mercedes-Benz Group have been increased as well due to positive fundamental expectations and intrinsic valuation-based upside potential. Exposures to Takeda Pharmaceuticals, Broadcom, United Airlines Holdings and Caterpillar have been liquidated based on sizeable profits already achieved and assessed overvaluation priced in by markets. Finally, the Fund’s passive allocation has been downsized by eliminating holdings in iShares MSCI EM Asia UCITS ETF, Xtrackers MSCI World Materials ETF, Xtrackers MSCI World Consumer Staples ETF and Nordea 1 SICAV Stable Return Fund and trimming the position in the iShares Edge MSCI World Minimum Volatility ETF.  

From the fixed income front, the Manager continued its portfolio realignment in reflecting the higher yielding environment and more importantly increasing the fund’s duration in line with the Manager’s strategy on the back of interest rate peaks. Indeed, the Manager closed positions in low yielding names and re-shifted the proceeds into higher coupon bonds, while it opened positions in selective sovereigns which have higher duration.

Market and Investment Outlook

Going forward, the Manager remains aligned to its initial view regarding the upcoming tempo of interest rate cuts, namely materially slower than currently priced by the markets. As well, the soft-landing scenario remains the base case, while real interest rates should record significant levels over the short term while inflation numbers will continue their normalization trend. This still paints a benevolent macroeconomic environment, although the most recent data coming from the Chinese economy tainted the global growth outlook to a certain degree. Within the fixed income space, the Manager will continue to seek value and duration opportunities, while from an equity point of view it will continue its focus on those market segments which underperformed recently as valuation levels particularly in market outperformers became unsustainable again. Specific allocations should be expected going forward into particular pockets of value weighting in additional factors alongside fundamental ones, such as technical indicators, corporate events and geopolitics.

A quick introduction to our Solid Future Defensive 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 (EUR)

ASSET CLASS

Mixed

MIN. INITIAL INVESTMENT

€2500

FUND TYPE

UCITS

BASE CURRENCY

EUR

5 year performance*

-3.85%

*View Performance History below
Inception Date: 25 Oct 2011
ISIN: MT7000003687
Bloomberg Ticker: SFUDEFA MV
Distribution Yield (%): N/A
Underlying Yield (%): N/A
Distribution: N/A
Total Net Assets: 16.5 mn
Month end NAV in EUR: 147.91
Number of Holdings:
Auditors: PriceWaterhouse Coopers
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

Amundi Euro Gov Bond 10-15Y
10.7%
Amundi Euro Gov Bond 7-10Y
5.1%
iShares Euro Corp Large Cap
4.0%
iShares Euro HY Corp
3.9%
iShares Fallen Angels HY Corp
3.6%
iShares USD HY Corp
1.8%
Walt Disney Co/The
1.6%
Amazon Inc
1.6%
Alphabet Inc
1.5%
iShares MSCI World
1.5%

Major Sector Breakdown*

Government
20.7%
Financials
19.9%
Consumer Staples
12.5%
Consumer Discretionary
12.5%
Asset 7
Communications
10.9%
Information Technology
7.1%
*** Adopting a look-through approach
Data for maturity buckets is not available for this fund.

Credit Ratings*

* Without adopting look-through approach

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

Europe ex UK
49.4%
North America
33.5%
Emerging/Frontier Markets ex China
7.7%
UK
6.8%
Japan
1.4%
Asia Pacific ex Japan
0.9%
China
0.4%
** Including exposure to CIS, adopting a look-through approach

Asset Allocation*

Conventional Bonds 67.3%
Equity 31.1%
Absolute Return 0.0%
Cash 1.6%
* Without adopting a look-through approach

Performance History (EUR)*

1 year

4.59%

3 year

-3.17%

5 year

-3.85%

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. Currency fluctuations may affect the value of investments and any derived income.

Currency Allocation

Euro 69.3%
USD 30.0%
GBP 0.7%
Data for risk statistics is not available for this fund.

Interested in this product?

  • Investment Objectives

    The Fund aims to deliver a positive total return in any three year period from a flexibly managed portfolio of global assets whilst maintaining a monthly VaR with a 99% confidence interval at or below 5% at all times. The Investment Manager shall invest primarily in a diversified portfolio across a wide spectrum of industries and sectors primarily via bonds, equities and eligible ETFs. Investment in these asset classes either directly or indirectly through UCITS Funds and/ or eligible non UCITS Funds.

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

    The Fund is classified under Article 6 of the SFDR meaning that the investments underlying this financial product do not take into account the EU criteria for environmentally sustainable economic activities.

  • Investor profile

    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

  • Commentary

    January 2024

    Introduction

    In January, markets continued from where they left off at the end of last year as equities continued delivering above-average performances in spite of the realization that the elusive March interest rate cut will not happen. This was mostly due to the excellent performance of the US economy in the last quarter of 2023, as it posted an annualised growth of 3.3%, exceeding analysts’ estimates of 3.1%. The resilience of the US labour market and the resilience of the US consumer have construed to the goldilocks environment where the US economy finds itself currently, a place where other economies struggle to catch-up. Only Japan seems to be getting another economic lifeline as the last decade of Abenomics finally managed to trigger inflation which in turn reflected into the local equity market which registered a multi-decade high. China, on the other hand, is stuck in a disinflationary environment as the construction sector debacle looks to be having a long-lasting negative impact on the local consumer, while the Communist authorities would rather have a natural normalization of the economic cycle than pushing for another round of sector-directed subsidies with the potential of future economic distortions and social imbalances. The recent local equity markets slump which reminds of the fundamental boom and bust profile of capital markets in China puts another layer of uncertainty as regards the interest of market participants in the second world economy and its viability as an investment for the world outside. Consequently, the investable universe becomes more concentrated for the time being, therefore riskier in the absence of diversification options. As the US elections season approaches, such context could only get more extreme.

    From the monetary front, the FED kept rates unchanged indicating they won’t reduce rates until inflation moves sustainably towards a desirable level. Chair Powell stated that it will be appropriate to begin reducing rates sometimes this year, emphasizing a meeting-by-meeting approach. A March cut is thus unlikely at this point. In Europe, the ECB maintained record-high interest rates and pledged to keep them restrictive until inflation reaches its 2% target, despite concerns about a looming recession and easing price pressures. President Lagarde noted that officials unanimously concurred that it was premature to engage in discussions regarding interest rate cuts.

    Equity markets have continued pushing upward in the month as an initial breather in the first days of the year have been more than recovered as the earnings season kicked in discovering a very lucrative holidays season for the corporate sector. Market internals seem to having depreciated once again. While in recent months we have seen a reversal of the recovery story from October 2022 from this regard, as market breath have generally broadened, value stocks recovered versus their growth peers and the mega caps reduced their dominance in terms of market performance, in January trends have taken into reverse again. On top of it, market volatility has again subsided leaving room for complacency among market participants, as markets were again being led by the AI theme and the Magnificent 7 (with the notable exception of Tesla). For the time being this somewhat begs for a market pullback, but from a broader view it moves the markets into a more unstable environment, where indexes concentration hits historical levels and growth assumptions implied by current valuation multiples defy gravitation. Maybe it’s time to remember another old-time adage from options investing – “picking up pennies in front of a steamroller”.

    Market Environment and Performance

    January’s Purchasing Managers’ Index (PMI) indicators showed an positive evolution in the Euro area economy, amid an improvement in manufacturing (reading 46.6 versus the previous month reading of 44.4) and a slowdown in services (reading of 48.4 versus a previous month reading of 48.8). Overall, the contraction in business activity softened while growth expectations strengthened to a nine-month high. Inflationary pressures returned to their downward trajectory to 2.8% from the uptick to 2.9% in December. Core inflation too eased to 3.3% from 3.4% in the previous month, above forecasts but still reaching its lowest level since March 2022.

    In the U.S., economic indicators continued portraying a relative level of robustness compared to its developed market peers. In January the industrial activity as measured by the latest PMI signalled a modest uptick (reading of 52.0 versus a previous month reading of 50.9). Optimism regarding the outlook for output over the next year improved too, as business continued expanding their staffing numbers. Annual rate of inflation in the US fell back to 3.1% in January following a brief increase to 3.4%, but came higher than forecasts of 2.9%. Core inflation which excludes volatile items such as food and energy held steady at 3.9%, compared to expectations it would slow to 3.7%.

    Equity markets have continued rallying into the new year on the back of a surprisingly strong earnings season debut and continuous hopes of even more accommodative financial conditions defining the market environment going forward. By the end of the month, the much-anticipated positive numbers and guidelines offered by mega caps management have led the markets higher towards new all-time highs. Statistically, a very strong January performance as this time around does brighten the expectations for the overall yearly performance. The S&P 500 index gained 3.59% supported by an uptick in aggregate earnings growth from the Magnificent Seven and a revival in the healthcare space. European markets rose in line with the global trends themselves being led by good earnings from the main index members as the EuroStoxx50 and the DAX gained 2.81% and only 0.91% respectively, with technology and financial names outperforming other sectors.

    Credit was by large conditioned by the disconnection of markets versus central banks’ chatter, with the 10-year US Treasury yield rose above 4.10%. German Bunds too saw yields rise above 2.30%, yet retreated back to 2.17% at month-end. The riskier segment outperformed investment grade bonds with Euro HY gaining 0.88%, while global HY trading sideways.

    Fund Performance

    In the month of January the Solid Future Defensive Fund registered a 0.86 per cent gain. On the equity allocation, the Fund’s allocation has been readjusted during the month, as the Manager decided aligned it to new fundamental views. New conviction names Pfizer and Eli Lilly have been added based on compelling fundamental factors and interesting risk-adjusted entry levels following protracted recent underperformances in the first case and a strong momentum in the second case. As well, positions have been initiated in the iShares US Property Yield UCITS ETF, Xtrackers MSCI Japan UCITS ETF and WisdomTree Artificial Intelligence ETF all based on fundamental themes which the Manager believes will outperform this year. Positions in Ahold Delhaize, Vinci SA and Mercedes-Benz Group have been increased as well due to positive fundamental expectations and intrinsic valuation-based upside potential. Exposures to Takeda Pharmaceuticals, Broadcom, United Airlines Holdings and Caterpillar have been liquidated based on sizeable profits already achieved and assessed overvaluation priced in by markets. Finally, the Fund’s passive allocation has been downsized by eliminating holdings in iShares MSCI EM Asia UCITS ETF, Xtrackers MSCI World Materials ETF, Xtrackers MSCI World Consumer Staples ETF and Nordea 1 SICAV Stable Return Fund and trimming the position in the iShares Edge MSCI World Minimum Volatility ETF.  

    From the fixed income front, the Manager continued its portfolio realignment in reflecting the higher yielding environment and more importantly increasing the fund’s duration in line with the Manager’s strategy on the back of interest rate peaks. Indeed, the Manager closed positions in low yielding names and re-shifted the proceeds into higher coupon bonds, while it opened positions in selective sovereigns which have higher duration.

    Market and Investment Outlook

    Going forward, the Manager remains aligned to its initial view regarding the upcoming tempo of interest rate cuts, namely materially slower than currently priced by the markets. As well, the soft-landing scenario remains the base case, while real interest rates should record significant levels over the short term while inflation numbers will continue their normalization trend. This still paints a benevolent macroeconomic environment, although the most recent data coming from the Chinese economy tainted the global growth outlook to a certain degree. Within the fixed income space, the Manager will continue to seek value and duration opportunities, while from an equity point of view it will continue its focus on those market segments which underperformed recently as valuation levels particularly in market outperformers became unsustainable again. Specific allocations should be expected going forward into particular pockets of value weighting in additional factors alongside fundamental ones, such as technical indicators, corporate events and geopolitics.

  • 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

    Mixed

    MIN. INITIAL INVESTMENT

    €2500

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    5 year performance*

    -3.85%

    *View Performance History below
    Inception Date: 25 Oct 2011
    ISIN: MT7000003687
    Bloomberg Ticker: SFUDEFA MV
    Distribution Yield (%): N/A
    Underlying Yield (%): N/A
    Distribution: N/A
    Total Net Assets: 16.5 mn
    Month end NAV in EUR: 147.91
    Number of Holdings:
    Auditors: PriceWaterhouse Coopers
    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

    Amundi Euro Gov Bond 10-15Y
    10.7%
    Amundi Euro Gov Bond 7-10Y
    5.1%
    iShares Euro Corp Large Cap
    4.0%
    iShares Euro HY Corp
    3.9%
    iShares Fallen Angels HY Corp
    3.6%
    iShares USD HY Corp
    1.8%
    Walt Disney Co/The
    1.6%
    Amazon Inc
    1.6%
    Alphabet Inc
    1.5%
    iShares MSCI World
    1.5%

    Top Holdings by Country*

    Europe ex UK
    49.4%
    North America
    33.5%
    Emerging/Frontier Markets ex China
    7.7%
    UK
    6.8%
    Japan
    1.4%
    Asia Pacific ex Japan
    0.9%
    China
    0.4%
    ** Including exposure to CIS, adopting a look-through approach

    Major Sector Breakdown*

    Government
    20.7%
    Financials
    19.9%
    Consumer Staples
    12.5%
    Consumer Discretionary
    12.5%
    Asset 7
    Communications
    10.9%
    Information Technology
    7.1%
    *** Adopting a look-through approach

    Asset Allocation*

    Conventional Bonds 67.3%
    Equity 31.1%
    Absolute Return 0.0%
    Cash 1.6%
    * Without adopting a look-through approach

    Performance History (EUR)*

    1 year

    4.59%

    3 year

    -3.17%

    5 year

    -3.85%

    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. Currency fluctuations may affect the value of investments and any derived income.

    Credit Ratings*

    * Without adopting look-through approach

    Currency Allocation

    Euro 69.3%
    USD 30.0%
    GBP 0.7%
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