Investment Objectives

The Fund aims to maximise the total level of return through investment, in a diversified portfolio of Emerging Market Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in Emerging Marketequities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of Emerging Market bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-Emerging Market issuers.

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

Investor Profile

A typical investor in the Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds 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 Emerging Market Bond Fund are those with a medium to high tolerance to risk and 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 as well as the investment cycle commensurate with an investment in Emerging Markets.

Fund Rules at a Glance

The Investment Manager shall invest primarily but not solely in a diversified portfolio of Emerging Market Corporate fixed income securities and Emerging Market Government fixed income securities with maturities of 10 years or less, rated at the time of investment BBB+ to CCC+ by S&P, or in bonds determined to be of comparable quality by the Investment Manager. The Investment Manager may also invest up to 10% of the Net Assets of the Sub-Fund in unrated fixed income securities.

  • Minimum Credit Rating CCC+ (or equivalent)
  • Up to 10% in Non-Rated Bonds
  • Average Credit Quality of B- (or equivalent)
  • Emerging Market Issuers as per MSCI Emerging and Frontier
  • Up to 15% in Emerging Market Equities
  • Use of FDIs for hedging purposes only
  • No limit on exposure to CIS
  • Up to 30% in Non Emerging Market Issuers

Commentary

January 2024

Introduction

Following a period of underperformance, emerging markets begun to exhibit signs of recovery, as evidenced by positive performance in the final months of 2023 that has extended into the new year. However, such progress remains tempered by the significant drag on performance that China continues to pose, coupled with concerns about the Federal Reserve maintaining higher-for-longer rates amid indications of sustained economic strength. The first monetary policy meeting for 2024 dashed hopes of pre-emptive interest rate cuts, with the Fed chair delivering a clear message that cuts may not occur as soon as some had anticipated, although prior projections of three cuts throughout 2024 were maintained.

Despite a 5.2% GDP growth in 2023, concerns linger about China’s economic outlook due to persistent deflationary pressures and a struggling real estate sector. Although the overall outlook has improved, alleviating some fears of prolonged weakness, these issues continue to weigh on confidence and fuel calls for further government intervention. In a recent effort to rebuild confidence, China adopted a new communication strategy. In January, Premier Li Qiang, China’s second-ranking official, took the unusual step of revealing China’s GDP growth figure before the statistics bureau did, while Governor Pan Gonghsheng personally announced a larger-than-expected RRR cut weeks in advance, instead of waiting for state agencies to publicize it. These acts were followed by the central bank unveiling comprehensive plans to guide money into sectors of national importance, aiming to revitalize the faltering economy in 2024.

From a performance standpoint, emerging market corporate credit posted gains (c. 1.06%), outperforming its developed market counterparts.

Market environment and performance

China’s macroeconomy, notwithstanding the lingering threat associated to; a real estate market slump, consumer spending, and deflationary pressures, expanded 5.2% in 2023, exceeding official targets and picking up from a 3.0% rise in 2022. Business activity, while marking a 13th straight month of growth in private sector activity, edged lower to 52.5 from 52.6 in December 2023. New orders grew the least in 3 months; while employment stabilized, with the services economy outperforming manufacturing one. Meanwhile, export sales returned to growth after falling in the prior six months.

India, following rapid economic growth of 7.2% in the 2022-23 fiscal year, economic momentum remained strong reflecting its growing strategic status as an alternative to China. Industrial production rose while GDP grew 7.6% in the July-September quarter of 2023. More recently, business activity too continued to signal expansionary conditions, owing to a faster growth in the service sector economy as new orders expanded at a fast pace, with export sales rose the most in three months.

Inflationary pressures, generally showed signs of easing across Latin America, paving the way for a continued easing in policy tightening. In Brazil, consumer headline inflation continued on a disinflationary path, falling to 4.51% from 4.62% in the previous month, to start off the year well above the central bank’s target of 3.25%, but within the tolerance band of 4.75%. Chile too saw prices cool, with inflation easing for a 14th consecutive month to 3.8%. Such declines led to further policy easing. In January, central bank of Brazil lowered its key Selic rate by 50bps to 11.25% in-line with expectations. Chile, among the first to cut rates, too lowered its benchmark interest rate by 100bps to 7.25% in its January meeting.

Fund performance

In January, the CC Emerging Market Bond Fund realized a marginal loss of 0.09% as yields on sovereign bonds widened. Throughout the month, the Manager maintained its portfolio allocation after having reduced its cash exposure while increasing the portfolio’s exposure to sovereign bonds and duration, in the previous months. Indeed, the decisions previously taken to increase the fund’s exposure to sovereigns and quasi-sovereigns, notably to Brazil and Mexico amongst other, have started to pay dividends.

Market and investment outlook

The recent rally in emerging markets, fueled by hopes of an early end to tight credit conditions, stalled in January as expectations for swift rate cuts in the U.S. diminished. Central bankers, mindful of inflation risks, reaffirmed their commitment to data-driven policy decisions. Despite the setback, sentiment among emerging market nations remains upbeat. This, thanks to a stream of positive data points, particularly on inflation, which bolsters the case for future policy easing in respective nations.

Though Asia’s economic powerhouse shows signs of recovery, it requires further consolidation. To rebuild confidence, the government has adopted a new communication strategy. However, concrete support measures remain awaited. Looking ahead, markets anticipate adjustments in fiscal and monetary policies in 2024. Strengthening efforts to improve employment will be crucial to alleviate job market pressure, enhance livelihoods, and ultimately foster long-term confidence in the world’s second-largest economy.

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 policy easing in the developed world, 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 while increasing the portfolio’s overall duration. Optimism for the year ahead remains on the back of continued rate cut expectations.

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

€100000

FUND TYPE

UCITS

BASE CURRENCY

EUR

5 year performance*

0%

*View Performance History below
Inception Date: 01 Feb 2020
ISIN: MT7000026456
Bloomberg Ticker: CCEMBFF MV
Distribution Yield (%): 4.75%
Underlying Yield (%): 5.93%
Distribution: 31/03 and 30/09
Total Net Assets: $9.8 mn
Month end NAV in EUR: 61.18
Number of Holdings: 48
Auditors: Deloitte Malta
Legal Advisor: Ganado Advocates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

iShares JPM USD EM Bond
6.0%
5.8% Oryx Funding Ltd 2031
4.1%
6.625% NBM US Holdings Inc 2029
4.0%
5.8% Turkcell 2028
4.0%
4.375% Freeport McMoran Inc 2028
3.9%
iShares JPM USD EM Corp Bond
3.8%
4% HSBC Holdings plc perp
3.8%
4.75% Banco Santander SA perp
3.6%
5.60% Petrobras Global Fin 2031
3.0%
3.25% Export-Import BK India 2030
2.8%

Major Sector Breakdown*

Government
17.3%
Materials
10.1%
Financials
7.4%
Funds
6.0%
Consumer Staples
6.0%
Consumer Discretionary
4.4%
*excluding exposures to CIS

Maturity Buckets*

39.8%
0-5 Years
38.2%
5-10 Years
8.5%
10 Years+
*based on the Next Call Date

Credit Ratings

Average Credit Rating: B+

Risk & Reward Profile

1
2
3
4
5
6
7
Lower Risk

Potentialy Lower Reward

Higher Risk

Potentialy Higher Reward

Top Holdings by Country*

United States
15.3%
Brazil
13.8%
Mexico
10.9%
India
6.5%
Oman
6.2%
Turkey
5.8%
United Kingdom
3.8%
Indonesia
3.6%
Malta (incl. cash)
3.6%
Spain
3.6%
*including exposures to CIS

Asset Allocation

Cash 3.6%
Bonds (incl. ETFs) 96.4%

Performance History (EUR)*

1 Year

-0.73%

3 Year

-16.97%

* The EUR Distributor Share Class (Class F) was launched on 06 February 2020.
** 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.
*** 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

USD 96.7%
Euro 3.3%
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 through investment, in a diversified portfolio of Emerging Market Corporate and Government fixed income securities as well as up to 15% of the Net Assets of the Sub-Fund in Emerging Marketequities. In pursuing this objective, the Investment Manager shall invest primarily in a diversified portfolio of Emerging Market bonds rated at the time of investment “BBB+” to “CCC+” by S&P, or in bonds determined to be of comparable quality. The Fund can also invest up to 10% of its assets in Non-Rated bond issues and up to 30% of its assets in Non-Emerging Market issuers.

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

  • Investor profile

    A typical investor in the Emerging Market Bond Fund would be one who is seeking to gain exposure to the Emerging Bond Market via corporate and/or sovereign bonds 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 Emerging Market Bond Fund are those with a medium to high tolerance to risk and 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 as well as the investment cycle commensurate with an investment in Emerging Markets.

    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

    • Minimum Credit Rating CCC+ (or equivalent)
    • Up to 10% in Non-Rated Bonds
    • Average Credit Quality of B- (or equivalent)
    • Emerging Market Issuers as per MSCI Emerging and Frontier
    • Up to 15% in Emerging Market Equities
    • Use of FDIs for hedging purposes only
    • No limit on exposure to CIS
    • Up to 30% in Non Emerging Market Issuers
  • Commentary

    January 2024

    Introduction

    Following a period of underperformance, emerging markets begun to exhibit signs of recovery, as evidenced by positive performance in the final months of 2023 that has extended into the new year. However, such progress remains tempered by the significant drag on performance that China continues to pose, coupled with concerns about the Federal Reserve maintaining higher-for-longer rates amid indications of sustained economic strength. The first monetary policy meeting for 2024 dashed hopes of pre-emptive interest rate cuts, with the Fed chair delivering a clear message that cuts may not occur as soon as some had anticipated, although prior projections of three cuts throughout 2024 were maintained.

    Despite a 5.2% GDP growth in 2023, concerns linger about China’s economic outlook due to persistent deflationary pressures and a struggling real estate sector. Although the overall outlook has improved, alleviating some fears of prolonged weakness, these issues continue to weigh on confidence and fuel calls for further government intervention. In a recent effort to rebuild confidence, China adopted a new communication strategy. In January, Premier Li Qiang, China’s second-ranking official, took the unusual step of revealing China’s GDP growth figure before the statistics bureau did, while Governor Pan Gonghsheng personally announced a larger-than-expected RRR cut weeks in advance, instead of waiting for state agencies to publicize it. These acts were followed by the central bank unveiling comprehensive plans to guide money into sectors of national importance, aiming to revitalize the faltering economy in 2024.

    From a performance standpoint, emerging market corporate credit posted gains (c. 1.06%), outperforming its developed market counterparts.

    Market environment and performance

    China’s macroeconomy, notwithstanding the lingering threat associated to; a real estate market slump, consumer spending, and deflationary pressures, expanded 5.2% in 2023, exceeding official targets and picking up from a 3.0% rise in 2022. Business activity, while marking a 13th straight month of growth in private sector activity, edged lower to 52.5 from 52.6 in December 2023. New orders grew the least in 3 months; while employment stabilized, with the services economy outperforming manufacturing one. Meanwhile, export sales returned to growth after falling in the prior six months.

    India, following rapid economic growth of 7.2% in the 2022-23 fiscal year, economic momentum remained strong reflecting its growing strategic status as an alternative to China. Industrial production rose while GDP grew 7.6% in the July-September quarter of 2023. More recently, business activity too continued to signal expansionary conditions, owing to a faster growth in the service sector economy as new orders expanded at a fast pace, with export sales rose the most in three months.

    Inflationary pressures, generally showed signs of easing across Latin America, paving the way for a continued easing in policy tightening. In Brazil, consumer headline inflation continued on a disinflationary path, falling to 4.51% from 4.62% in the previous month, to start off the year well above the central bank’s target of 3.25%, but within the tolerance band of 4.75%. Chile too saw prices cool, with inflation easing for a 14th consecutive month to 3.8%. Such declines led to further policy easing. In January, central bank of Brazil lowered its key Selic rate by 50bps to 11.25% in-line with expectations. Chile, among the first to cut rates, too lowered its benchmark interest rate by 100bps to 7.25% in its January meeting.

    Fund performance

    In January, the CC Emerging Market Bond Fund realized a marginal loss of 0.09% as yields on sovereign bonds widened. Throughout the month, the Manager maintained its portfolio allocation after having reduced its cash exposure while increasing the portfolio’s exposure to sovereign bonds and duration, in the previous months. Indeed, the decisions previously taken to increase the fund’s exposure to sovereigns and quasi-sovereigns, notably to Brazil and Mexico amongst other, have started to pay dividends.

    Market and investment outlook

    The recent rally in emerging markets, fueled by hopes of an early end to tight credit conditions, stalled in January as expectations for swift rate cuts in the U.S. diminished. Central bankers, mindful of inflation risks, reaffirmed their commitment to data-driven policy decisions. Despite the setback, sentiment among emerging market nations remains upbeat. This, thanks to a stream of positive data points, particularly on inflation, which bolsters the case for future policy easing in respective nations.

    Though Asia’s economic powerhouse shows signs of recovery, it requires further consolidation. To rebuild confidence, the government has adopted a new communication strategy. However, concrete support measures remain awaited. Looking ahead, markets anticipate adjustments in fiscal and monetary policies in 2024. Strengthening efforts to improve employment will be crucial to alleviate job market pressure, enhance livelihoods, and ultimately foster long-term confidence in the world’s second-largest economy.

    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 policy easing in the developed world, 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 while increasing the portfolio’s overall duration. Optimism for the year ahead remains on the back of continued rate cut expectations.

  • 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

    €100000

    FUND TYPE

    UCITS

    BASE CURRENCY

    EUR

    5 year performance*

    0%

    *View Performance History below
    Inception Date: 01 Feb 2020
    ISIN: MT7000026456
    Bloomberg Ticker: CCEMBFF MV
    Distribution Yield (%): 4.75%
    Underlying Yield (%): 5.93%
    Distribution: 31/03 and 30/09
    Total Net Assets: $9.8 mn
    Month end NAV in EUR: 61.18
    Number of Holdings: 48
    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

    iShares JPM USD EM Bond
    6.0%
    5.8% Oryx Funding Ltd 2031
    4.1%
    6.625% NBM US Holdings Inc 2029
    4.0%
    5.8% Turkcell 2028
    4.0%
    4.375% Freeport McMoran Inc 2028
    3.9%
    iShares JPM USD EM Corp Bond
    3.8%
    4% HSBC Holdings plc perp
    3.8%
    4.75% Banco Santander SA perp
    3.6%
    5.60% Petrobras Global Fin 2031
    3.0%
    3.25% Export-Import BK India 2030
    2.8%

    Top Holdings by Country*

    United States
    15.3%
    Brazil
    13.8%
    Mexico
    10.9%
    India
    6.5%
    Oman
    6.2%
    Turkey
    5.8%
    United Kingdom
    3.8%
    Indonesia
    3.6%
    Malta (incl. cash)
    3.6%
    Spain
    3.6%
    *including exposures to CIS

    Major Sector Breakdown*

    Government
    17.3%
    Materials
    10.1%
    Financials
    7.4%
    Funds
    6.0%
    Consumer Staples
    6.0%
    Consumer Discretionary
    4.4%
    *excluding exposures to CIS

    Asset Allocation

    Cash 3.6%
    Bonds (incl. ETFs) 96.4%

    Maturity Buckets*

    39.8%
    0-5 Years
    38.2%
    5-10 Years
    8.5%
    10 Years+
    *based on the Next Call Date

    Performance History (EUR)*

    1 Year

    -0.73%

    3 Year

    -16.97%

    * The EUR Distributor Share Class (Class F) was launched on 06 February 2020.
    ** 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.
    *** 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.

    Credit Ratings

    Average Credit Rating: B+

    Currency Allocation

    USD 96.7%
    Euro 3.3%
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