Malta High Income Fund Accumulator

The Fund aims to maximise the total level of return through investment, primarily in debt securities and money market instruments issued by the Government of Malta, and equities and corporate bonds issued and listed on the MSE.

The Investment Manager may also invest directly or indirectly up to 15% of its assets in “Non- Maltese Assets”. The Investment Manager will maintain an exposure to local debt securities of at least 55% of the value of the Net Assets of the Fund.

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

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 Investment Manager may invest up to 10% of the net assets of the Sub-Fund in un-listed Maltese and/or Non-Maltese Assets. As far as the “Non-Maltese Assets” segment of the Sub-Fund is concerned, the Investment Manager will not be targeting any international debt securities of any particular duration or coupon. However, the Sub-Fund is generally not expected to hold investments that, at the time of investment, are rated below “B3” by Moody’s or below “B-“ by S&P or in bonds determined to be of comparable quality by the Investment Manager.
• The Investment Manager will not be targeting any local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or local corporate bonds issued and listed on the Malta Stock Exchange) of any particular duration or coupon.
• The Investment Manager will, at all times, maintain a direct exposure to local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or issued and listed on the Malta Stock Exchange) of at least 55% of the value of the Net Assets of the Sub-Fund.
• The Sub-Fund may also invest in term deposits held with credit institutions regulated in Malta and other EU, EEA and OECD Member States.
• This Sub-Fund shall not invest, in the aggregate, more than 10% of the Net Assets of the Sub-Fund in units or shares of other UCITS or other CISs.

January 2025

Introduction

In 2024, Malta’s economy sustained its growth trajectory, driven by strong domestic demand and solid export performance. Tourism arrivals to Malta remained on the rise, while employment stayed robust, with unemployment falling to 3.1%.

Malta’s economy grew by 4.9% (annualized) in the third quarter of 2024, following an upwardly revised 8% increase in the previous quarter. This marked the slowest growth rate since the fourth quarter of 2022, influenced by a slowdown in household consumption. At the same time, imports grew at a faster pace than exports. However, both government spending and gross fixed capital formation showed stronger growth.

Inflation pressures on consumers also eased, with the annual inflation rate dropping to 1.8% in December from 2.1% in the previous month. This was the lowest inflation rate in nearly three years, as prices for food & non-alcoholic beverages, alcoholic beverages & tobacco, and transport all moderated.

Market environment and performance

The US economy maintains a steady growth trajectory, bolstered by positive leading indicators, particularly the recent Purchasing Managers’ Index (PMI) figures. 

In Europe, the economic picture is brightening after stagnation in Q4 2024.  Eurozone private sector activity expanded for the first time since August 2024, driven by a resurgent services sector that offset continued weakness in manufacturing.  Despite this improvement, growth remains uneven, concentrated outside the Eurozone’s largest economies, which continue to struggle.  Overall demand remains soft.

Inflation, previously noting a substantial decline due to base effects (particularly on energy), rose for a fourth straight month to 2.5% in January 2025, the highest since July. Core inflation remained steady at 2.7% while services inflation edged lower to 3.9% from 4.0% in the previous month.

The labour market, a beacon of hope for the Eurozone, remained healthy, with the unemployment rate revolving at notable lows (6.3% in December), and significantly below a 20-year average of 9.3%.

Fund performance

In January, the Malta High Income Fund registered a loss of 0.65% for the month, underperforming its internally compared benchmark which saw a 0.11% loss.

Market and investment outlook

Financial markets narrative at the start of the year remained largely unchanged, with investor attention focused on the dynamic political landscape, central bank policies, and economic data.

Economic indicators, both leading and lagging, continue to emphasize a regional divergence. Despite the Federal Reserve’s “higher for longer” approach, the US maintains broad-based strength, with consumer demand staying robust. In mainland Europe, growth appears stagnant overall. However, this does mask stark regional divergences. As Spain continues to out-grow its regional peers, the German economy remains an underperformer with its labour market on the verge of deteriorating. As a result, there is clearly scope for the ECB to ease policy further.

Locally, we expect Malta’s economy to continue performing well. Recent data has been promising, with easing price pressures and tax cuts set to be implemented in 2025, which should support domestic consumer spending. Additionally, the strong influx of tourists in 2024 is a positive sign. Optimism within the tourism sector is expected to grow, benefiting the economy further if this upward trend continues.