European Corporate Bond Fund
Transcription
European Corporate Bond Fund
May 2015 European Corporate Bond Fund 31 May 2015 The fund aims to provide long term growth from capital gains and the reinvestment of income generated by investing predominantly in European investment grade bonds. The fund is actively managed by our investment teams who may invest in a wide range of bonds (e.g. corporate bonds including high yield bonds, government backed securities, overseas bonds, index-linked bonds, floating rate notes (FRNs) and asset backed securities (ABSs) and/or money market instruments) in order to take advantage of opportunities they have identified. Non euro denominated assets held in the fund will generally be hedged back to euros. The value of investments within the fund can fall as well as rise and is not guaranteed - you may get back less than you pay in. The fund may use derivatives for the purposes of efficient portfolio management, reduction of risk or to meet its investment objective if this is permitted and appropriate. The value of overseas assets held in the fund may rise and fall as a result of exchange rate fluctuations. Fund Manager Launch Date Morningstar Rating Fund Currency Benchmark Current Fund Size Craig MacDonald 25 Sep 2003 **** EUR iBoxx Euro Corporate All Stocks Index €3116.3m Information Ratio Tracking Error Volatility Yield to Maturity 2.76 0.38 2.84% 1.6% Modified Duration 5.2 SICAV Fund Bond Fund Monthly This document is intended for use by individuals who are familiar with investment terminology. Please contact your financial adviser if you need an explanation of the terms used. Please note that the breakdowns below do not take into account the economic exposure created by derivative positions. For a full explanation of specific risks and the overall risk profile of this fund and the shareclasses within it, please refer to the Key Investor Information Documents and Prospectus which are available on our website – www.standardlifeinvestments.com Fund Information * Composition by Maturity Composition by Credit Rating Rating Fund % Rating Fund % AAA 2.0 BB 8.6 AA 6.4 B 0.1 N/R 0.7 A 34.2 BBB 48.0 Composition by Sector 46.7 42.4 8.2 1.9 0.3 0.5 Top Ten Holdings Fund % Corporates Financials Sovereigns Not Classified Collateralised Fund % 0-5YRS 5-10YRS 10-15YRS 15-20YRS 20-25YRS 25+YRS 52.4 44.7 1.6 0.8 0.5 Bonds Fund % Germany (Govt of) 1.5% 2024 General Electrical 0.8% 2022 JPMorgan Chase 2.625% 2021 General Electric 1.25% 2023 Bank of Ireland 2% 2017 Hutchison Whampoa 4.75% 2016 DnB NOR Bank 4.375% 2021 Bharti Airtel 4% 2018 Hutchison Whampoa 1.375% 2021 Great-West Lifeco 2.5% 2023 0.7 0.7 0.6 0.6 0.6 0.6 0.6 0.5 0.5 0.5 Assets in top ten holdings 5.9 Fund Performance * Price Indexed 135 Performance has been calculated over the stated period on the share price performance basis, based on the institutional shareclass and net of fees. For your relevant charges please contact your Standard Life Investments Sales Representative. 130 125 120 Source: Standard Life Investments (Fund) and Thomson Datastream (Benchmark) 115 110 105 100 European Corporate Bond May-15 Nov-14 May-14 Nov-13 May-13 Nov-12 May-12 Nov-11 May-11 Nov-10 May-10 95 iBoxx Euro Corporate All Stocks Index Cumulative Performance Source: Standard Life Investments (Fund) and Thomson Datastream (Benchmark) YTD (%) 1 month (%) 3 months (%) 6 months (%) 1 year (%) Retail Fund Performance 0.7 -0.6 -1.1 1.0 3.7 Institutional Fund Performance 0.9 -0.6 -1.0 1.3 4.3 iBoxx Euro Corporate All Stocks Index 0.4 -0.4 -1.1 0.9 4.3 3 years (%) 5 years (%) Since launch (%) Retail Fund Performance 19.0 29.1 62.8 Institutional Fund Performance 20.9 32.4 76.4 iBoxx Euro Corporate All Stocks Index 19.0 30.1 69.4 Note: Past Performance is not a guide to future performance. The price of shares and the income from them may go down as well as up and cannot be guaranteed; an investor may receive back less than their original investment. For full details of the fund's objective, policy, investment and borrowing powers and details of the risks investors need to be aware of, please refer to the prospectus. Definitions Information Ratio - the active return of a portfolio divided by the tracking error. Tracking Error - the standard deviation of the difference between portfolio and index returns ex-post 3yr. Volatility - the annualised standard deviation of monthly total returns over the last 36 months. Yield to Maturity - gives an indication of the total expected return from a bond if it is held to maturity. It reflects both the interest payments made to the bondholder and any capital gain or loss at maturity. It is based on a snapshot of the portfolio on specified date. It does not include any impact from charges. Modified Duration - gives an indication of a bond's sensitivity to a change in interest rates. It is based on a snapshot of the portfolio on specified date. It does not include any impact from charges. Not Classified (N/C) may include bonds which do not fall into the specified categories and 'Cash and Other'. Not Rated (N/R) may include bonds which do not have a rating under iBoxx classification (such bonds may still be rated by S&P and/or Moodys) and 'Cash and Other'. Cash and Other - may include bank and building society deposits, other money market instruments such as Certificates of Deposits (CDs), Floating Rate Notes (FRNs) including Asset Backed Securities (ABSs), Money Market Funds and allowances for tax, dividends and interest due if appropriate. Investment Review and Outlook Market Review May turned out to be a rollercoaster for bond investors as bund yields sold off sharply in the first half the month, before retracing much of the move as the month drew to a close. Crowded long positioning and better economic data in Europe were the main drivers for the rise in yields, while central bank comments about front-loading bond purchases drove the retracement. 10-year bunds started the month at +37 basis points (bps), moving above 70 bps mid-month before finishing at +49. Credit spreads, on the other hand, widened very marginally. The net result of these moves was a negative total return for euro investment grade credit, with the rise in underlying bund yields the main driver. The stalemate in Greek debt negotiations weighed on spreads, as did continued issuance at the longer end of the market. This meant peripheral credits underperformed and credit curves steepened, with 10-year and above issuance underperforming as the moves at the longer end of the bund curve discouraged buyers. Within sectors, energy performed well on the back of the stabilising oil price, while insurance underperformed due to its high share of more volatile long duration subordinated bonds. Interestingly, high yield outperformed investment grade as continued inflows and its lower sensitivity to rates moves provided support. At an individual security level, Vodafone underperformed as rumours about a merger with highly-levered Liberty Global emerged. Meanwhile, RWE came under further pressure as the German regulator announced plans to increase emission charges for coal power plants. Activity We were fairly active in May. We continued to reduce the overall credit risk of the portfolio by reducing our exposure to subordinated financial debt; this included lower tier two bonds from Commerzbank and Nykredit and an additional tier one issue from SEB. We also cut our positioning in corporate hybrid debt (America Movil) and longer-dated Italian corporate debt (Enel and ENI). As part of this risk reduction trade, we also reduced our high yield position in Petrobras after its strong recovery year to date. Our focus in the primary market was mainly on higher-rated companies and we purchased new issuance from General Electric, UBS and Wells Fargo. Elsewhere, we added Centrica to the portfolio following the result of the UK election and increased our exposure to Energias de Portugal due to its improving credit profile. Finally, within lower tier two bank debt, we switched from longer-dated BNP bonds into shorter-dated callable bonds from Societe General for a pick-up in spread and shortening in spread duration. Performance The portfolio delivered a negative return over the month, performing broadly in line with the benchmark index. In terms of active performance, security selection and off-benchmark holdings in high yield compensated for small negative contributions from duration and curve positioning. At an individual security level, our underweight exposure to EDF and decision to retain our position in ‘fallen angel’ Areva were beneficial. The French government is looking to orchestrate a solution to the latter’s balance sheet problems. Our offbenchmark holding in Petrobras recovered strongly, while our holding in Lloyds, in which we have a high degree of conviction, also performed well. However, overweight holdings in subordinated bonds of Aviva and Allianz cost relative performance. Outlook & Strategy We remain constructive on investment grade credit given the background of solid fundamentals and supportive central bank policy. This should translate into tighter spreads over the next six months. However, in the near term, spread performance is constrained by the situation around Greece, rates volatility and technical factors in European credit markets. The pressure on Greece and its creditors will increase during the next few weeks and will weigh on sentiment. The sudden back up in government bond yields has taken its toll on credit, while the increased volatility is affecting investors’ risk appetite. Finally, a filled issuance pipeline is weighing on the market, especially at the longer end of the maturity spectrum, where most of the issuance has happened year-to-date. As these factors are unlikely to disappear in the short-term, we will keep the Fund’s risk profile balanced and wait for a larger correction to appear. Other Fund Information Retail Acc STPECBA LX LU0177497491 A0MRSB Bloomberg ISIN WKN Domicile Custodian Name Auditor Name Retail Dist STECBAD LX LU0277136965 A0PCZZ Institutional Acc STPECBD LX LU0177497814 A0MRSC Institutional Dist STECBDD LX LU0455263052 A0YBUL Luxembourg The Bank of New York Mellon (Luxembourg) S.A., 2-4 Rue Eugene Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg PricewaterhouseCoopers S.à r.l., Reviseur d'entreprises 400, route d'Esch, L-1014 Luxembourg, Grand Duchy of Luxembourg Reporting Dates Interim 30 Jun Annual 31 Dec Settlement Time Email Telephone Share Price Calculation Time Dealing Cut Off Time T+4 [email protected] +352 24 525 716 15:00 (Luxembourg time) 13:00 (Luxembourg time) Currency EUR EUR EUR *Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life**. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. **Standard Life means the relevant member of the Standard Life group, being Standard Life plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time. “FTSE®”, "FT-SE®", "Footsie®", [“FTSE4Good®” and “techMARK] are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited (“FTSE”) under licence. [“All-World®”, “All- Share®” and “All-Small®” are trade marks of FTSE.] The Fund is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”), by the London Stock Exchange Plc (the “Exchange”), Euronext N.V. (“Euronext”), The Financial Times Limited (“FT”), European Public Real Estate Association (“EPRA”) or the National Association of Real Estate Investment Trusts (“NAREIT”) (together the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE EPRA NAREIT Developed Index (the “Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, none of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. “FTSE®” is a trade mark of the Exchange and the FT, “NAREIT®” is a trade mark of the National Association of Real Estate Investment Trusts and “EPRA®” is a trade mark of EPRA and all are used by FTSE under licence.” Additional Information for Switzerland : The prospectus, the key investor information documents, the articles of incorporation, the annual and semiannual report in German, and further information can be obtained free of charge from the representative in Switzerland: Carnegie Fund Services S.A., 11, rue du Général-Dufour, CH-1204 Geneva, Switzerland, web: www.carnegie-fund-services.ch. The Swiss paying agent is: Banque Cantonale de Genève, 17, quai de l’Ile, CH-1204 Geneva. The last share prices can be found on www.fundinfo.com. To find out more about our fund range, visit our website or alternatively speak to your usual contact at Standard Life Investments. www.standardlifeinvestments.com Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority. Standard Life Investments Global SICAV is an umbrella type investment company with variable capital registered in Luxembourg (no. B78797) at 2-4, rue Eugéne Ruppert, L-2453 Luxembourg, Grand Duchy of Luxembourg. Calls may be monitored and/or recorded to protect both you and us and help with our training. www.standardlifeinvestments.com © 2015 Standard Life 201506221036 INVSCV63 0515 SQ_EUR