Investment Objectives

The Fund aims to maximise the total level of return for investors through investment, primarily, in debt securities and money market instruments issued by the Government of Malta. The Investment Manager may also invest directly or indirectly via eligible ETFs and/or eligible CISs) up to 15% of its assets in “Non-Maltese Assets” in debt securities and/or money market instruments issued or guaranteed by Governments of EU, EEA and OECD Member States other than Malta. The Investment Manager will not be targeting debt securities of any particular duration, coupon or credit rating.

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

 

Investor Profile

A typical investor in the Malta Government Bond Fund would be one who is seeking to gain exposure to the local Government Bond Market whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the Malta Government Bond Fund are those who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle.

Fund Rules

The Investment Manager will invest primarily in a portfolio of debt securities and money market instruments issued or guaranteed by the Government of Malta. The Investment Manager may invest directly in eligible collective investment schemes whose investment objective and policies are consistent with those of the Sub-Fund. The Investment Manager may also invest directly (or indirectly via eligible exchange traded funds and/or eligible collective investment schemes) up to 15% of its assets in “Non-Maltese Assets” as per below:

  • Debt securities and/or money market instruments issued or guaranteed by Governments of EU, EEA and OECD Member States other than Malta, their constituent states or their local authorities; and/or
  • Debt securities and/or money market instruments issued or guaranteed by supranational bodies of EU, EEA and OECD Member States other than Malta, their agencies, associated financial institutions or other associated bodies.
    The Investment Manager will not be targeting debt securities (including, money market instruments, bonds, notes and other debt securities) of any particular duration, coupon or credit rating. The Sub-Fund may also invest in term deposits held with credit institutions regulated in Malta and other EU, EEA and OECD Member States.

For temporary and/or defensive purposes, the Sub-Fund may invest in other short-term debt securities or fixed income instruments, money market funds, cash and cash equivalents. The Sub-Fund may also at any time hold such securities for cash management purposes, pending investment in accordance with its Investment Policy and to meet operating expenses and redemption requests.

In pursuing its Investment Objective and Investment Policy, the Sub-Fund will be subject to the Investment, Borrowing and Leverage Restrictions set out in the Prospectus and the Offering Supplement. Furthermore, this Sub-Fund shall not invest, in the aggregate, more than 10% of its assets in units or shares of other UCITS or other CISs. The Investment Manager may make use of listed and OTC FDIs (including, but not limited to, futures, forwards, options and swaps) linked to bonds, interest rates and currencies for efficient portfolio management,  hedging purposes and the reduction of risk only. The Sub-Fund will not make use of FDIs for investment purposes. 

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.

Fund performance

In April, the CC Malta Government Bond Fund experienced a loss of 0.64%, outperforming its internally compared benchmark which recorded 1.53% loss, aligned with the widening observed amongst European sovereign bonds.

Throughout the month, the Manager maintained its portfolio allocation after having reduced its cash exposure while increasing the portfolio’s exposure to longer-date Maltese and European sovereigns, in the previous months.

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.

A quick introduction to our Malta Government 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 (EUR)

ASSET CLASS

Bonds

MIN. INITIAL INVESTMENT

€2500

FUND TYPE

UCITS

BASE CURRENCY

EUR

5 year performance*

-8.69%

*View Performance History below
Inception Date: 21 Apr 2017
ISIN: MT7000017992
Bloomberg Ticker: CCMGBFA MV
Distribution Yield (%): N/A
Underlying Yield (%): 3.23
Distribution: N/A
Total Net Assets: €31.45 mn
Month end NAV in EUR: 93.78
Number of Holdings: 39
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

1.00% MGS 2031
9.6%
4.50% MGS 2028
8.6%
5.25% MGS 2030
7.9%
4.45% MGS 2032
5.5%
4.00% MGS 2033
4.0%
4.30% MGS 2033
3.9%
5.20% MGS 2031
3.6%
5.10% MGS 2029
3.4%
3.95% MGS 2028
3.2%
2.30% MGS 2029
3.2%
Data for major sector breakdown is not available for this fund.

Maturity Buckets*

16.8%
0-5 Years
59.9%
5-10 Years
16.2%
10 Years+
*based on the Next Call Date (also includes cash)
Data for credit ratings is not available for this fund.

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

Malta
80.6%
Germany
2.6%
Belgium
2.1%
Portugal
1.3%
Spain
1.1%
France
1.0%
Romania
0.8%
Slovenia
0.7%
Poland
0.7%
Hungary
0.7%
*including exposures to CIS

Asset Allocation

Cash 4.9%
Bonds 92.9%
CIS/ETFs 2.2%

Performance History (EUR)*

1 Year

2.46%

3 Year

-13.51%

5 Year

-8.69%

* The Accumulator Share Class (Class A) was launched on 21 April 2017.
** 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. 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.

Currency Allocation

Euro 99.0%
USD 1.0%
Data for risk statistics is not available for this fund.

Interested in this product?

  • Investment Objectives

    The Fund aims to maximise the total level of return for investors through investment, primarily, in debt securities and money market instruments issued by the Government of Malta. The Investment Manager may also invest directly or indirectly via eligible ETFs and/or eligible CISs) up to 15% of its assets in “Non-Maltese Assets” in debt securities and/or money market instruments issued or guaranteed by Governments of EU, EEA and OECD Member States other than Malta. The Investment Manager will not be targeting debt securities of any particular duration, coupon or credit rating.

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

     

  • Investor profile

    A typical investor in the Malta Government Bond Fund would be one who is seeking to gain exposure to the local Government Bond Market whilst seeking to accumulate wealth and save over time in a product that re-invests coupons received on a gross basis. Furthermore, investors in the Malta Government Bond Fund are those who are planning to hold on to their investment for the medium-to-long term so as to benefit from the compound interest effect whilst also participating in the interest rate cycle.

    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

    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.

    Fund performance

    In April, the CC Malta Government Bond Fund experienced a loss of 0.64%, outperforming its internally compared benchmark which recorded 1.53% loss, aligned with the widening observed amongst European sovereign bonds.

    Throughout the month, the Manager maintained its portfolio allocation after having reduced its cash exposure while increasing the portfolio’s exposure to longer-date Maltese and European sovereigns, in the previous months.

    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

    €2500

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    5 year performance*

    -8.69%

    *View Performance History below
    Inception Date: 21 Apr 2017
    ISIN: MT7000017992
    Bloomberg Ticker: CCMGBFA MV
    Distribution Yield (%): N/A
    Underlying Yield (%): 3.23
    Distribution: N/A
    Total Net Assets: €31.45 mn
    Month end NAV in EUR: 93.78
    Number of Holdings: 39
    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

    1.00% MGS 2031
    9.6%
    4.50% MGS 2028
    8.6%
    5.25% MGS 2030
    7.9%
    4.45% MGS 2032
    5.5%
    4.00% MGS 2033
    4.0%
    4.30% MGS 2033
    3.9%
    5.20% MGS 2031
    3.6%
    5.10% MGS 2029
    3.4%
    3.95% MGS 2028
    3.2%
    2.30% MGS 2029
    3.2%

    Top Holdings by Country*

    Malta
    80.6%
    Germany
    2.6%
    Belgium
    2.1%
    Portugal
    1.3%
    Spain
    1.1%
    France
    1.0%
    Romania
    0.8%
    Slovenia
    0.7%
    Poland
    0.7%
    Hungary
    0.7%
    *including exposures to CIS

    Asset Allocation

    Cash 4.9%
    Bonds 92.9%
    CIS/ETFs 2.2%

    Maturity Buckets*

    16.8%
    0-5 Years
    59.9%
    5-10 Years
    16.2%
    10 Years+
    *based on the Next Call Date (also includes cash)

    Performance History (EUR)*

    1 Year

    2.46%

    3 Year

    -13.51%

    5 Year

    -8.69%

    * The Accumulator Share Class (Class A) was launched on 21 April 2017.
    ** 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. 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.

    Currency Allocation

    Euro 99.0%
    USD 1.0%
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