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.

December 2024

Introduction

In 2024, Malta’s economy continued 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 narrative for credit markets remained largely unchanged at the end of the year, with investor focus centered on the political landscape, economic data, and central bank policy.

Central banks have recently adopted a more accommodative stance, tailoring their policies to specific economic needs. The European Central Bank (ECB) continues to emphasize data-driven decision-making. Grappling with a weakening euro and declining economic activity, the ECB remains focused on ensuring inflation returns to its 2% target and will adjust its policies based on incoming data, without committing to a fixed rate path.

In line with recent portfolio adjustments, we will modify the portfolio’s duration as necessary. Additionally, we aim to maintain the fund’s exposure to other European sovereigns, utilizing the permitted 15% maximum allocation.

Fund performance

In December, the Malta High Income Fund registered a gain of 0.73% for the month, outperforming its internally compared benchmark which saw a 0.07% loss.

Market and investment outlook

The narrative for credit markets remained largely unchanged at the end of the year, with investor focus centered on the political landscape, economic data, and central bank policy.

Central banks have recently adopted a more accommodative stance, tailoring their policies to specific economic needs. The European Central Bank (ECB) continues to emphasize data-driven decision-making. Grappling with a weakening euro and declining economic activity, the ECB remains focused on ensuring inflation returns to its 2% target and will adjust its policies based on incoming data, without committing to a fixed rate path.

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.