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 “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 High Income Bond Fund Class B (Accumulator) in USD is:
- Seeking to accumulate wealth and save over time in a product that re-invests gross dividends automatically.
- Planning to hold their investment for the medium-to-long term so as to benefit from the compound interest effect.
Fund Rules
The Investment Manager of the High Income Bond Fund 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 of the fund. Some of the restrictions include:
- The fund may not invest more than 10% of its assets in the same company
- 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 other fund
- The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments
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
5 year performance*
0%
*View Performance History below
Inception Date: 23 May 2022
ISIN: MT7000030912
Bloomberg Ticker: CCHIHBB MV
Distribution Yield (%): N/A
Underlying Yield (%): 5.24
Distribution: N/A
Total Net Assets: 50.74 mln
Month end NAV in USD: 128.95
Number of Holdings: 131
Auditors: Deloitte Malta
Legal Advisor: Ganado & Associates
Custodian: Sparkasse Bank Malta p.l.c.
Performance To Date (USD)
Top 10 Holdings
3.0%
2.8%
2.3%
1.9%
1.8%
1.8%
1.7%
1.7%
1.6%
1.5%
Major Sector Breakdown*
Financials
12.0%
Communications
8.1%
Funds
7.8%
Consumer Discretionary
7.1%
Communications
4.4%
Consumer Discretionary
3.9%
Maturity Buckets*
Credit Ratings*
Risk & Reward Profile
Lower Risk
Potentialy Lower Reward
Higher Risk
Potentialy Higher Reward
Top Holdings by Country*
24.0%
11.4%
9.5%
5.1%
4.9%
4.3%
3.4%
3.1%
2.6%
2.6%
Asset Allocation
Performance History (EUR)*
1 Year
6.27%
3 Year
-%
5 Year
-%
Currency Allocation
Risk Statistics
-0.75 (3Y)
-0.32 (5Y)
4.84% (3Y)
7.57% (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 “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 High Income Bond Fund Class B (Accumulator) in USD is:
- Seeking to accumulate wealth and save over time in a product that re-invests gross dividends automatically.
- Planning to hold their investment for the medium-to-long term so as to benefit from the compound interest effect.
-
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 the same company
- 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 other fund
- The fund may not carry out uncovered sales (naked short-selling) of securities or other financial instruments
-
Commentary
January 2024
Introduction
Market participants, though wary of possible threats to inflation – notably; sticky services inflation, a resilient labour market, and tensions in the Red Sea – remained confident that central banks had finished hiking, sustaining expectations of pre-emptive interest rate cuts. However, the first monetary policy meeting for 2024 dashed such hopes, providing a clear view that cuts may not come as soon as expected. Prior projections suggesting three cuts over 2024 were maintained by policy makers.
The ECB, in its January meeting, 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. The Federal Reserve too 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 sometime this year, emphasizing a meeting-by-meeting approach. A March cut is however unlikely.
In January, 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. In the Eurozone periphery, the risk premium on Italian bonds relative to German securities reached a low of 1.56%. Beyond sovereign bonds, the entire fixed income market saw a partial reversal in the positive performance experienced at the end of 2023, as enthusiasm for near-term rate cuts subsided. Investment grade corporate credit was largely unchanged, yet still outperformed government bonds with new issuance being absorbed well and spreads tightening further on hopes of a soft landing. Within high yield, the eurozone was the notable outperformer (+0.83%), experiencing tighter spreads and positive total returns that exceeded those of its investment-grade counterparts.
Market environment and performance
A mild deceleration in Q3 together with weaker private sector activity, pointed to a possible contraction in December, reinforcing the likelihood of the euro area entering a technical recession in the latter half of the 2023. Unexpectedly, Euro Area economy stalled amid a better-than-expected growth in Spain and Italy while the French economy stalled and Germany contracted 0.3%.
Tentative signs of improvement in the Euro area economy were seen at the start of the year, January’s Purchasing Managers’ Index (PMI) survey showed, amid an improvement in manufacturing (reading 46.6 v a previous month reading of 44.4) and slowdown in services (reading 48.4 v a previous month reading of 48.8). Indeed, the contraction in business activity and new orders softened, while growth expectations strengthened to a nine-month high. Employment, previously contracting, showed signs of stabilization, while export demand fell at its slowest pace since last April. Persistent inflationary pressures remained apparent, particularly for prices charged by firms for goods and services. Both output prices and input costs rose at their sharpest rates for eight months.
Inflationary pressures returned to a downward trajectory following an uptick in inflation in December. Core prices – which exclude volatile food and energy prices – too eased to 3.3%, above forecasts of 3.2% but still reaching its lowest level since March 2022.
In the United States, both lagging and leading economic indicators, continued to portray a relative level of robustness compared to its Western developed counterpart. In January, data showed that US GDP grew at an annualised rate of 3.3% in Q4 2023, and for the year as a whole, by 3.1%, compared to 1.9% in 2022 and Fed’s estimates of 2.6%. In January, industrial activity as measured by the latest PMI indices signalled a modest uptick (reading 52.0 v a previous month reading of 50.9) in business activity, driven by a faster rise in services. The latter fuelled by a rise in new orders amid improved demand conditions in the domestic and foreign market. Optimism regarding the outlook for output over the next year too improved, with firms continuing to expand 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%. From the employment front, hiring surged by 317k, the most in a year, exceeding the upwardly revised December figure of 278k and significantly surpassing forecasts of 155k. The unemployment rate remained steady at 3.7%, defying market expectations of 3.8%. Wage growth edged higher, with average hourly earnings rising by 0.6%, outpacing the 0.4% monthly gains observed in November and December. Undoubtedly, January’s job numbers further challenge narratives of a decelerating labour market in the US.
Fund performance
The CC High Income Bond Fund started the year on the right footing, recording a gain of 0.47% from the previous month’s close, as global high yield corporate credit generally headed higher.
The manager, in line with its mandate, maintained an active approach to managing the portfolio. Throughout the month, the manager – aiming to increase the portfolio’s duration in a gradual manner – continued to take advantage of selective opportunities, primarily by participating in initial offerings. Indeed, the month saw a number of market participants coming to market, with liquidity and appetite certainly increasing. Credit issuers which the CC High Income Bond Fund increased its exposure to include; Schaeffler AG, Mundy’s, Banco Santander and United Group.
Market and investment outlook
Hopes for a rapid end to interest rate hikes faded in January as central bankers reiterated their commitment to data-driven policy decisions and emphasized the continued threat of inflation. Despite reaching peak levels and inflation sustaining a downward trend, Fed Chair Jerome Powell stated that rate cuts in March were unlikely. Similarly, while acknowledging progress in “disinflation,” ECB President Christine Lagarde stressed that discussions of easing policy were premature. The key challenge for policy makers going forward is balancing continued high interest rates with supporting economic growth. The euro area, unlike its Western counterparts, faces an additional headwind whereby key economies, traditionally bolstering the single currency bloc, are now dragging down and offsetting the resilient growth observed in Southern European economies.
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 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 (USD)
$
ASSET CLASS
Bonds
MIN. INITIAL INVESTMENT
$2500
FUND TYPE
UCITS
BASE CURRENCY
USD
5 year performance*
0%
*View Performance History below
Inception Date: 23 May 2022
ISIN: MT7000030912
Bloomberg Ticker: CCHIHBB MV
Distribution Yield (%): N/A
Underlying Yield (%): 5.24
Distribution: N/A
Total Net Assets: 50.74 mln
Month end NAV in USD: 128.95
Number of Holdings: 131
Auditors: Deloitte Malta
Legal Advisor: Ganado & Associates
Custodian: Sparkasse Bank Malta p.l.c.
Performance To Date (USD)
Risk & Reward Profile
1234567Lower Risk
Potentialy Lower Reward
Higher Risk
Potentialy Higher Reward
Top 10 Holdings
iShares Fallen Angels HY Corp3.0%
iShares USD High Yield Corp2.8%
4% JP Morgan Chase & Co perp2.3%
7.5% Nidda Healthcare Holding 20261.9%
iShares Euro HY Corp1.8%
8.192% Encore Capital Group Inc 20281.8%
3.875% Allwyn International 20271.7%
2.5% Hapag-Lloyd AG 20281.7%
4.625% Volkswagen perp1.6%
3.5% Eircom Finance DAC 20261.5%
Top Holdings by Country*
United States24.0%
Germany11.4%
France9.5%
Spain5.1%
Italy4.9%
Brazil4.3%
Netherlands3.4%
United Kingdom3.1%
Luxembourg2.6%
Czech Republic2.6%
*including exposures to CISMajor Sector Breakdown*
Financials
12.0%
Communications
8.1%
Funds
7.8%
Consumer Discretionary
7.1%
Communications
4.4%
Consumer Discretionary
3.9%
*excluding exposures to CISAsset Allocation
Cash 3.8%Bonds 88.4%CIS/ETFs 7.8%Maturity Buckets*
69.0%0-5 Years17.2%5-10 Years2.1%10 Years+*based on the Next Call DatePerformance History (EUR)*
1 Year
6.27%
3 Year
-%
5 Year
-%
* The chart data and performance history show the simulated performance for the new share class B (Accumulator), based on the performance of the share class A (Accumulator) of the High Income Bond Fund which was launched on 29 May 2013. The investment objectives and policies and also the Risk and Reward Profile of both share classes are substantially similar.** 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 65.0%USD 35.0%Other 0.0%Risk Statistics
Sharpe Ratio-0.75 (3Y)
-0.32 (5Y)
Std. Deviation4.84% (3Y)
7.57% (5Y)
-
Downloads
Commentary
January 2024
Introduction
Market participants, though wary of possible threats to inflation – notably; sticky services inflation, a resilient labour market, and tensions in the Red Sea – remained confident that central banks had finished hiking, sustaining expectations of pre-emptive interest rate cuts. However, the first monetary policy meeting for 2024 dashed such hopes, providing a clear view that cuts may not come as soon as expected. Prior projections suggesting three cuts over 2024 were maintained by policy makers.
The ECB, in its January meeting, 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. The Federal Reserve too 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 sometime this year, emphasizing a meeting-by-meeting approach. A March cut is however unlikely.
In January, 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. In the Eurozone periphery, the risk premium on Italian bonds relative to German securities reached a low of 1.56%. Beyond sovereign bonds, the entire fixed income market saw a partial reversal in the positive performance experienced at the end of 2023, as enthusiasm for near-term rate cuts subsided. Investment grade corporate credit was largely unchanged, yet still outperformed government bonds with new issuance being absorbed well and spreads tightening further on hopes of a soft landing. Within high yield, the eurozone was the notable outperformer (+0.83%), experiencing tighter spreads and positive total returns that exceeded those of its investment-grade counterparts.
Market environment and performance
A mild deceleration in Q3 together with weaker private sector activity, pointed to a possible contraction in December, reinforcing the likelihood of the euro area entering a technical recession in the latter half of the 2023. Unexpectedly, Euro Area economy stalled amid a better-than-expected growth in Spain and Italy while the French economy stalled and Germany contracted 0.3%.
Tentative signs of improvement in the Euro area economy were seen at the start of the year, January’s Purchasing Managers’ Index (PMI) survey showed, amid an improvement in manufacturing (reading 46.6 v a previous month reading of 44.4) and slowdown in services (reading 48.4 v a previous month reading of 48.8). Indeed, the contraction in business activity and new orders softened, while growth expectations strengthened to a nine-month high. Employment, previously contracting, showed signs of stabilization, while export demand fell at its slowest pace since last April. Persistent inflationary pressures remained apparent, particularly for prices charged by firms for goods and services. Both output prices and input costs rose at their sharpest rates for eight months.
Inflationary pressures returned to a downward trajectory following an uptick in inflation in December. Core prices – which exclude volatile food and energy prices – too eased to 3.3%, above forecasts of 3.2% but still reaching its lowest level since March 2022.
In the United States, both lagging and leading economic indicators, continued to portray a relative level of robustness compared to its Western developed counterpart. In January, data showed that US GDP grew at an annualised rate of 3.3% in Q4 2023, and for the year as a whole, by 3.1%, compared to 1.9% in 2022 and Fed’s estimates of 2.6%. In January, industrial activity as measured by the latest PMI indices signalled a modest uptick (reading 52.0 v a previous month reading of 50.9) in business activity, driven by a faster rise in services. The latter fuelled by a rise in new orders amid improved demand conditions in the domestic and foreign market. Optimism regarding the outlook for output over the next year too improved, with firms continuing to expand 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%. From the employment front, hiring surged by 317k, the most in a year, exceeding the upwardly revised December figure of 278k and significantly surpassing forecasts of 155k. The unemployment rate remained steady at 3.7%, defying market expectations of 3.8%. Wage growth edged higher, with average hourly earnings rising by 0.6%, outpacing the 0.4% monthly gains observed in November and December. Undoubtedly, January’s job numbers further challenge narratives of a decelerating labour market in the US.
Fund performance
The CC High Income Bond Fund started the year on the right footing, recording a gain of 0.47% from the previous month’s close, as global high yield corporate credit generally headed higher.
The manager, in line with its mandate, maintained an active approach to managing the portfolio. Throughout the month, the manager – aiming to increase the portfolio’s duration in a gradual manner – continued to take advantage of selective opportunities, primarily by participating in initial offerings. Indeed, the month saw a number of market participants coming to market, with liquidity and appetite certainly increasing. Credit issuers which the CC High Income Bond Fund increased its exposure to include; Schaeffler AG, Mundy’s, Banco Santander and United Group.
Market and investment outlook
Hopes for a rapid end to interest rate hikes faded in January as central bankers reiterated their commitment to data-driven policy decisions and emphasized the continued threat of inflation. Despite reaching peak levels and inflation sustaining a downward trend, Fed Chair Jerome Powell stated that rate cuts in March were unlikely. Similarly, while acknowledging progress in “disinflation,” ECB President Christine Lagarde stressed that discussions of easing policy were premature. The key challenge for policy makers going forward is balancing continued high interest rates with supporting economic growth. The euro area, unlike its Western counterparts, faces an additional headwind whereby key economies, traditionally bolstering the single currency bloc, are now dragging down and offsetting the resilient growth observed in Southern European economies.
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 while increasing the portfolio’s overall duration. Optimism for the year ahead remains on the back of continued rate cut expectations.