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 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 – EUR 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.

Below are some rules at a glance, please refer to the offering supplement for full details.

  • 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

February 2025

Introduction

Following a turbulent start to the year, where resurgent US Treasury yields, driven by anticipated fiscal expansion and inflation concerns stemming from a change in administration, created significant market volatility, credit markets demonstrated a strong rebound. This positive trend continued into February.

Despite persistent inflationary risks, including the potential impact of tariffs and stronger-than-anticipated inflation data, global bond markets reacted positively to weakening US sentiment indicators and escalating growth concerns. Consequently, the US 10-year Treasury yield experienced a 33bps decline, concluding the month at 4.21%.

In Europe, improved growth prospects, fuelled by increasing optimism regarding a resolution to the Russia-Ukraine conflict, were counterbalanced by concerns over increased government borrowing for defence initiatives. This resulted in a more modest reduction in European sovereign yields compared to the US. Specifically, the yield on the benchmark 10-year German Bund declined by 5bps to 2.41%.

Central bank policy action remained pivotal. The Federal Reserve, after holding interest rates steady in January, indicated they see no immediate need for further adjustments, citing a strong economy and a less restrictive policy stance. They emphasized the need to balance inflation control with economic growth. In contrast, the European Central Bank (ECB), despite encouraging inflation trends and an additional 25bps cut in January, signalled it’s too early to discuss further reductions, prioritizing continued inflation convergence.

February witnessed continued positive performance across corporate bond markets, albeit with varying regional dynamics. European high yield bonds exhibited a 1.04% gain, surpassing investment grade performance. In the US, a combination of slight spread widening and shorter duration resulted in US high yield underperforming, posting returns of 0.65%. The weakening US dollar provided tailwinds for emerging market debt, which recorded a 1.34% return.

Market environment and performance

The US economy exhibited signs of emerging growth concerns, driven by potential tariff impacts and persistent inflationary pressures. Leading indicators, specifically the February composite PMI, sharply declined to 50.4 from 52.7, signaling near-stagnation in private sector activity. This marked the slowest expansion since September 2023, with a renewed contraction in services output. Business optimism for the coming year reached its lowest point since December 2022 (excluding September), reflecting anxieties over federal spending cuts, tariffs, heightened price pressures, and geopolitical uncertainties.

Inflationary pressures intensified, with headline inflation rising to 3.0% in January, exceeding forecasts and the previous month’s 2.9%, indicating stalled progress. Core inflation climbed to 3.3% from 3.2%, surpassing market expectations. The labour market presented a mixed picture: job growth fell below expectations, while the unemployment rate dipped to 4.0%. Critically, average hourly earnings rose by 4.1%, matching the revised prior month and exceeding forecasts, signaling potential for continued wage-driven inflation.

In Europe, the economic picture is brightening after stagnation in Q4 2024. February’s PMI reading remaining steady at 50.2, unchanged from the previous month, and indicating a marginal economic growth in the bloc. Spain led the expansion with a strong and accelerating rise in business activity, while Ireland also saw faster growth, and Italy returned to expansion for the first time in four months. In contrast, Germany experienced only modest growth, and France’s activity continued to decline.

On the price front, Inflation eased to 2.4%, down from a six-month high of 2.5% but slightly above market expectations of 2.3%, as price growth slowed for services and energy. Core inflation which excludes volatile energy, food, alcohol & tobacco prices, fell to 2.6% in February, the lowest since January 2022. The labour market, remained healthy, with the unemployment rate revolving at notable lows (6.2% in January), and significantly below the 20-year average.

Fund performance

The CC High Income Bond Fund rose 0.85% in February, reflecting the moves observed across credit markets.

In February, the portfolio manager continued to actively manage the fund in-line with its mandate, gradually increasing duration by adding European exposure while reducing dollar-denominated debt. This strategy reflects the European Central Bank’s advanced stage in its rate-cutting cycle, contrasting with the US Federal Reserve’s stance of holding rates steady, despite pressure from the new administration.  Seeking to boost income generation ahead of anticipated further easing, the manager increased its exposure (amongst others) to Loxam, Unicredit, and Matterhorn Telecom, while also establishing new exposures, namely: Credit Agricole and HSBC.  Conversely, the fund decreased its holdings in US dollar-denominated companies like Nemak and JPMorgan Chase.

Market and investment outlook

The credit market 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. The US, despite the Federal Reserve’s “higher for longer” stance, continues to demonstrate resilient broad-based strength, underpinned by a robust labour market that has thus far supported consumer spending. Meanwhile, Europe has shown tentative signs of growth acceleration following a Q4 2024 stagnation, with private sector activity in expansionary territory for the second consecutive month.

In credit markets, the combination of a resilient labour market in the US and persistent inflationary pressures dictates a prudent, neutral duration strategy, especially as the yield curve’s trajectory remains highly uncertain.

Our current preference leans towards European credit, underpinned by the prospects of continued monetary easing by the ECB. Nevertheless, the dynamic nature of the current environment, particularly the constantly evolving geopolitical tensions, require a highly proactive and adaptive management style to navigate potential risks and capitalize on emerging opportunities.

A quick introduction to our Euro High Income 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*

3.80%

*View Performance History below
Inception Date: 30 May 2013
ISIN: MT7000007761
Bloomberg Ticker: CALCHAR MV
Distribution Yield (%): N/A
Underlying Yield (%): 5.41
Distribution: N/A
Total Net Assets: €47.77 mln
Month end NAV in EUR: 131.06
Number of Holdings: 140
Auditors: Grant Thornton
Legal Advisor: Ganado & Associates
Custodian: Sparkasse Bank Malta p.l.c.

Performance To Date (EUR)

Top 10 Holdings

iShares Fallen Angels HY Corp
2.8%
iShares USD High Yield Corp
2.0%
7.035% Encore Capital Group Inc 2028
1.9%
iShares Euro High Yield Corp
1.9%
4.625% Volkswagen perp
1.8%
4.875% Cooperative Rabobank perp
1.7%
6.75% Societe Generale perp
1.6%
4.375% Cheplapharm 2028
1.6%
3.5% VZ Secured Financing 2032
1.6%
3.5% Energizer Gamma perp
1.4%

Major Sector Breakdown*

Financials
11.5%
Asset 7
Communications
10.2%
Health Care
7.6%
Funds
6.7%
Consumer Discretionary
6.3%
Industrials
4.5%
*excluding exposures to CIS

Maturity Buckets*

73.8%
0-5 Years
12.4%
5-10 Years
3.9%
10 Years+
* based on the Next Call Date

Credit Ratings*

Average Credit Rating: BB
*excluding exposures to CIS

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
22.7%
France
11.4%
Germany
9.2%
Italy
6.9%
Netherlands
5.0%
Spain
4.7%
Luxembourg
4.3%
Brazil
3.3%
Turkey
2.9%
Malta
2.8%
*including exposures to CIS

Asset Allocation

Cash 3.2%
Bonds 90.1%
CIS/ETFs 6.7%

Performance History (EUR)*

1 Year

5.59%

3 Year

7.67%

5 Year

3.80%

* The Accumulator Share Class (Class A) was launched on 29 May 2013. 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 68.6%
USD 31.4%
Other 0.0%

Risk Statistics

Sharpe Ratio
0.16 (3Y)
-0.16 (5Y)
Std. Deviation
4.92% (3Y)
7.74% (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 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.
    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

    • 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

    February 2025

    Introduction

    Following a turbulent start to the year, where resurgent US Treasury yields, driven by anticipated fiscal expansion and inflation concerns stemming from a change in administration, created significant market volatility, credit markets demonstrated a strong rebound. This positive trend continued into February.

    Despite persistent inflationary risks, including the potential impact of tariffs and stronger-than-anticipated inflation data, global bond markets reacted positively to weakening US sentiment indicators and escalating growth concerns. Consequently, the US 10-year Treasury yield experienced a 33bps decline, concluding the month at 4.21%.

    In Europe, improved growth prospects, fuelled by increasing optimism regarding a resolution to the Russia-Ukraine conflict, were counterbalanced by concerns over increased government borrowing for defence initiatives. This resulted in a more modest reduction in European sovereign yields compared to the US. Specifically, the yield on the benchmark 10-year German Bund declined by 5bps to 2.41%.

    Central bank policy action remained pivotal. The Federal Reserve, after holding interest rates steady in January, indicated they see no immediate need for further adjustments, citing a strong economy and a less restrictive policy stance. They emphasized the need to balance inflation control with economic growth. In contrast, the European Central Bank (ECB), despite encouraging inflation trends and an additional 25bps cut in January, signalled it’s too early to discuss further reductions, prioritizing continued inflation convergence.

    February witnessed continued positive performance across corporate bond markets, albeit with varying regional dynamics. European high yield bonds exhibited a 1.04% gain, surpassing investment grade performance. In the US, a combination of slight spread widening and shorter duration resulted in US high yield underperforming, posting returns of 0.65%. The weakening US dollar provided tailwinds for emerging market debt, which recorded a 1.34% return.

    Market environment and performance

    The US economy exhibited signs of emerging growth concerns, driven by potential tariff impacts and persistent inflationary pressures. Leading indicators, specifically the February composite PMI, sharply declined to 50.4 from 52.7, signaling near-stagnation in private sector activity. This marked the slowest expansion since September 2023, with a renewed contraction in services output. Business optimism for the coming year reached its lowest point since December 2022 (excluding September), reflecting anxieties over federal spending cuts, tariffs, heightened price pressures, and geopolitical uncertainties.

    Inflationary pressures intensified, with headline inflation rising to 3.0% in January, exceeding forecasts and the previous month’s 2.9%, indicating stalled progress. Core inflation climbed to 3.3% from 3.2%, surpassing market expectations. The labour market presented a mixed picture: job growth fell below expectations, while the unemployment rate dipped to 4.0%. Critically, average hourly earnings rose by 4.1%, matching the revised prior month and exceeding forecasts, signaling potential for continued wage-driven inflation.

    In Europe, the economic picture is brightening after stagnation in Q4 2024. February’s PMI reading remaining steady at 50.2, unchanged from the previous month, and indicating a marginal economic growth in the bloc. Spain led the expansion with a strong and accelerating rise in business activity, while Ireland also saw faster growth, and Italy returned to expansion for the first time in four months. In contrast, Germany experienced only modest growth, and France’s activity continued to decline.

    On the price front, Inflation eased to 2.4%, down from a six-month high of 2.5% but slightly above market expectations of 2.3%, as price growth slowed for services and energy. Core inflation which excludes volatile energy, food, alcohol & tobacco prices, fell to 2.6% in February, the lowest since January 2022. The labour market, remained healthy, with the unemployment rate revolving at notable lows (6.2% in January), and significantly below the 20-year average.

    Fund performance

    The CC High Income Bond Fund rose 0.85% in February, reflecting the moves observed across credit markets.

    In February, the portfolio manager continued to actively manage the fund in-line with its mandate, gradually increasing duration by adding European exposure while reducing dollar-denominated debt. This strategy reflects the European Central Bank’s advanced stage in its rate-cutting cycle, contrasting with the US Federal Reserve’s stance of holding rates steady, despite pressure from the new administration.  Seeking to boost income generation ahead of anticipated further easing, the manager increased its exposure (amongst others) to Loxam, Unicredit, and Matterhorn Telecom, while also establishing new exposures, namely: Credit Agricole and HSBC.  Conversely, the fund decreased its holdings in US dollar-denominated companies like Nemak and JPMorgan Chase.

    Market and investment outlook

    The credit market 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. The US, despite the Federal Reserve’s “higher for longer” stance, continues to demonstrate resilient broad-based strength, underpinned by a robust labour market that has thus far supported consumer spending. Meanwhile, Europe has shown tentative signs of growth acceleration following a Q4 2024 stagnation, with private sector activity in expansionary territory for the second consecutive month.

    In credit markets, the combination of a resilient labour market in the US and persistent inflationary pressures dictates a prudent, neutral duration strategy, especially as the yield curve’s trajectory remains highly uncertain.

    Our current preference leans towards European credit, underpinned by the prospects of continued monetary easing by the ECB. Nevertheless, the dynamic nature of the current environment, particularly the constantly evolving geopolitical tensions, require a highly proactive and adaptive management style to navigate potential risks and capitalize on emerging opportunities.

  • 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*

    3.80%

    *View Performance History below
    Inception Date: 30 May 2013
    ISIN: MT7000007761
    Bloomberg Ticker: CALCHAR MV
    Distribution Yield (%): N/A
    Underlying Yield (%): 5.41
    Distribution: N/A
    Total Net Assets: €47.77 mln
    Month end NAV in EUR: 131.06
    Number of Holdings: 140
    Auditors: Grant Thornton
    Legal Advisor: Ganado & Associates
    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 Fallen Angels HY Corp
    2.8%
    iShares USD High Yield Corp
    2.0%
    7.035% Encore Capital Group Inc 2028
    1.9%
    iShares Euro High Yield Corp
    1.9%
    4.625% Volkswagen perp
    1.8%
    4.875% Cooperative Rabobank perp
    1.7%
    6.75% Societe Generale perp
    1.6%
    4.375% Cheplapharm 2028
    1.6%
    3.5% VZ Secured Financing 2032
    1.6%
    3.5% Energizer Gamma perp
    1.4%

    Top Holdings by Country*

    United States
    22.7%
    France
    11.4%
    Germany
    9.2%
    Italy
    6.9%
    Netherlands
    5.0%
    Spain
    4.7%
    Luxembourg
    4.3%
    Brazil
    3.3%
    Turkey
    2.9%
    Malta
    2.8%
    *including exposures to CIS

    Major Sector Breakdown*

    Financials
    11.5%
    Asset 7
    Communications
    10.2%
    Health Care
    7.6%
    Funds
    6.7%
    Consumer Discretionary
    6.3%
    Industrials
    4.5%
    *excluding exposures to CIS

    Asset Allocation

    Cash 3.2%
    Bonds 90.1%
    CIS/ETFs 6.7%

    Maturity Buckets*

    73.8%
    0-5 Years
    12.4%
    5-10 Years
    3.9%
    10 Years+
    * based on the Next Call Date

    Performance History (EUR)*

    1 Year

    5.59%

    3 Year

    7.67%

    5 Year

    3.80%

    * The Accumulator Share Class (Class A) was launched on 29 May 2013. 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.

    Credit Ratings*

    Average Credit Rating: BB
    *excluding exposures to CIS

    Currency Allocation

    Euro 68.6%
    USD 31.4%
    Other 0.0%

    Risk Statistics

    Sharpe Ratio
    0.16 (3Y)
    -0.16 (5Y)
    Std. Deviation
    4.92% (3Y)
    7.74% (5Y)
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