Stand: 30.06.2023
Performance Review During the third quarter of 2020, generally positive market sentiment drove a credit market advance in July and August despite a resurgence in global COVID-19 cases. However, September marked a reversal as market participants grappled with renewed concerns over the pandemic anda persistent political impasse regarding additional fiscal stimulus. Despite this finish, credit spreads generally tightened from the prior quarter-end. For the quarter, the fund s A (Mdis) USD shares returned 4,12%, and its benchmark, the ICE BofA US High Yield Constrained Index, returned 4,70%. QUARTERLY KEY PERFORMANCE DRIVERS Our industry allocation detracted from relative performance, led by our overweight exposures in the energy industry and underweights in the retail and entertainment segments. Conversely, our overweight exposures in the gaming and restaurant industries and underweight in the consumerproducts segment contributed to results. Security selection was a major contributor to performance, led by our selection in the energy, finance and industrial industries. Conversely, our security selection in the technology, restaurants and building/construction segments hindered results. Our ratings-quality exposure detracted from performance, while our yield-curve positioning benefitted results. ONE-MONTH KEY PERFORMANCE DRIVERS Our industry allocation detracted from relative performance, led by our overweight exposures in the energy industry and underweights in the entertainment and retail segments. Conversely, our overweight exposures in the restaurant and building/construction industries contributedto results. Security selection was a major contributor to performance, led by our selection in the energy and chemicals industries. Conversely, our security selection in the media non-cable, food and beverage and packaging segments hindered results. Our ratings-quality exposure contributed marginally to performance, while our yield-curve positioning hindered results. Outlook & Strategy Against the backdrop of risk-off market sentiment, the high-yield (HY) market posted a negative return for the month. Higher-rated BB bonds underperformed their lower-quality B and CCC rated counterparts; on a year-to-date basis however, BB rated bonds continue to outperform.Although defaults rose during September, the monthly pace of defaults has generally trended downward compared with the high reached duringMay. Furthermore, default levels outside of the energy sector remained benign. While a supportive technical environment has persisted amidst the US Federal Reserve s unprecedented (albeit limited) involvement in the financial market, we continue to maintain a more neutral view on HY credit. We expect potential near term volatility from risks associated with theimpasse regarding additional pandemic-related stimulus, the November US election (with President Trump s health status a particular concern)and a potential delay in COVID-19 vaccine availability. Given challenged fundamentals, we believe individual security selection is paramount and we remain underweight credits in industries most exposed to pandemic-related difficulties. We are continuing to find pockets of value in both select new issues and in the secondary market thatallow us to take positions with risk/return tradeoffs that we believe are appropriate. We seek to identify what we believe to be attractively-pricedassets in our preferred segment of the market in order to capitalise on any near-term volatility. Longer term, we remain optimistic that the market headwinds we have experienced from 2020 should gradually subside throughout 2021. With central bank policies driving investor capital into the HY asset class, we continue to believe that rigorous fundamental analysis and prudent creditselection will add value going forward.