AXA WF Euro Buy and Maintain Credit
Last NAV 111.5400 EUR as of 17/10/19
The Sub-Fund seeks to achieve a mix of income and capital growth measured in Euro by investing in investment grade corporate debt securities from issuers located worldwide, over a medium term period.
Synthetic Risk & Reward Information scale
The risk category is calculated using historical performance data and may not be a reliable indicator of the Sub-Fund's future risk profile. The risk category shown is not guaranteed and may shift over time. The lowest category does not mean risk free.
Why is this Fund in this category?
Fund manager comment : 30/09/19
Market Review: September saw further easing in US monetary policy, where the Federal Open Market Committee (FOMC) moved to cut the federal funds rate by 25 basis points (bps) to 1.5–1.75%, as markets expected. The decision was not a unanimous one, as three FOMC participants dissented, with two voting to keep rates unchanged and another for a 50bps cut. The Federal Reserve’s economic projections were broadly unchanged, with GDP growth a little firmer, supported by lower rates expectations. Chairman Powell described a favourable economic outlook, but saw downside risks in global growth, trade uncertainty and geopolitical risks. During the month, new developments regarding US-Sino trade relations were relatively scarce, with the two sides still in negotiations. US rates were volatile throughout the period, rallying in the second part of September to finish the month at 1.5% at the 10-year point. Elsewhere in the US, we saw funding pressures in short-term dollar markets, which resulted in a large surge in overnight repo rates. This was mainly driven by technical factors but was addressed by a series of open market operations carried out by the New York Fed – this saw the central bank injecting billions of liquidity into the financial system, which led the situation to normalise. In Europe, the European Central Bank (ECB) announced new stimulus as part of a comprehensive monetary policy package designed to counter the signs of an ailing Eurozone economy. The implemented measures included a depo rate cut and tiering, a change to forward guidance, easier TLTRO conditions and smaller but open-ended quantitative easing (QE). Apart from the relatively small amount of announced QE, the rest of the measures were broadly within what markets expected. Outgoing president Mario Draghi emphasised again the importance of fiscal policy on economic growth, in an environment where the balance of risks to economic activity is “tilted to the downside”. Any further QE is expected to be opposed by hawkish governing council members, notably Jens Weidmann, president of the German Bundesbank. In the UK, September was a politically charged month, which saw Prime Minister Boris Johnson announcing a prorogation (suspension) of Parliament. This prompted a significant backlash from the opposition, rebel Tory MPs and various groups, and led to Parliament passing a key piece of legislation, mandating the government to ask for an extension to Article 50 in the event that no deal is secured by 31 October. After the prorogation took effect, the Supreme Court ruled on a legal challenge regarding its lawfulness. The court declared the suspension of parliament null and void, determining that Prime Minister Johnson had unlawfully asked the Queen to suspend Parliament for five weeks, and thus frustrated the democratic process by leaving MPs unable to scrutinise the Brexit process. Since this point, focus has shifted on the expected new Brexit deal proposal by the UK government. In the interim, the Bank of England left policy unchanged at its September meeting by unanimous vote. The Monetary Policy Committee (MPC) noted that global growth had weakened, attributing some of this to global trade tensions. It also noted that UK GDP growth had most likely slowed on an underlying basis, but remained volatile in part due to Brexit developments. The MPC also described the emergence of a ‘degree of excess supply’ – or slack – in the economy that could reduce domestically generated inflation pressures. Brexit developments are expected to drive the future path of monetary policy at this stage, with the BoE adopting a ‘wait and see’ approach. UK rates at the 10-year point were mostly flat compared to last month, standing at 0.48% at the 10-year point. Credit spreads diverged globally in September – the US dollar market significantly outperformed, tightening 7 basis points (bps), in contrast to sterling (-2 bps) and euro (+4 bps). On an absolute return basis, sterling significantly outperformed, given the rally in UK government bond yields. At the sector level, non-financials generally outperformed financials, with media, energy and capital goods leading the way. Lower-rated high yield and emerging market debt outperformed developed market investment grade. AB Inbev carried out a successful $5 billion IPO for its activities in Asia. Budweiser APAC shares will start trading on the Hong Kong market on 30 September. This is the second-highest IPO of the year, after Uber Technologies in May. Dupont is looking to sell its Nutrition & Biosciences unit for $20–25 billion and IFF, Kerry, Givaudan and DSM have been reported as potential buyers. The situation should evolve rapidly in the next few weeks. Thomas Cook defaulted on the back of failed negotiations with its shareholders on a restructuring plan and a lack of short-term liquidities. Roughly 600,000 tourists had to be repatriated due to the announcement and, more importantly, many business partners, caterers, hotels and service companies will be affected. Ford Motor Credit and FCE Bank were downgraded back to high yield by Moody’s – Ba1 with a stable outlook. Ford is now a crossover company but an S&P downgrade to low BBB is widely anticipated before year-end. Moody’s justified the new credit rating on the back of operational challenges and disappointing results compared with peers and industry trends. Atlantia was downgraded by S&P with a negative outlook, the HoldCo being now BB+ and the Opco being BBB-. The main reason is that Atlantia faces greater regulatory and legal risks following the arrest of ASPI and SPEA (Atlantia’s engineering subsidiaries) employees on allegations that safety reports into other ASPI viaducts carried out (after the Genoa bridge collapse) were falsified. ABN Amro issued a press release announcing that it is the subject of an investigation by the Dutch authorities, relating to requirements on the prevention of money laundering and financing of terrorism. The impact is still difficult to assess but should be manageable for the bank. September was a busy month for the primary market, especially in euros, where we saw more than €90 billion of new issues – the heaviest month on record for the past 10 years. Benefiting from the very low rate environment, most of the issuers who came to the euro market were keen to prefund their 2020–2021 debt programme. We also noted that, having been boosted by increasing risk appetite, sectors under pressure or high-beta names were able to easily issue billions of euros, thanks to demand that didn’t fade for most of the month. As usual, in such an environment, we saw some asset and liability management (ALM) exercises. We also saw two multibillion deals to finance acquisitions: Dassault Systèmes, with a €3.65 billion multi-tranche deal to finance the Medidata acquisition, and Danaher’s €6.25 billion financing for its acquisition of GE’s BioPharma division. Outlook: The global manufacturing sector weakened further in September, with the US ISM Index falling to 47.8, its lowest level since the financial crisis a decade ago. The equivalent index in the euro area also dropped further, and it seems that global manufacturing is on the verge of negative growth. So far, non-manufacturing activity has held up better, with domestic sectors in many major economies continuing to be supported by low unemployment and rising real incomes. However, the fear is that weaker factory output reflects uncertainty in the global economy, particularly around trade, and that this will eventually affect employment and broader economic growth. Therefore, the odds are shifting in favour of two additional interest-rate cuts by the Fed before year-end, taking the fed funds rate to 1.25%. These interest-rate expectations are supportive for bonds and will limit the extent by which US treasury yields can increase in the months ahead. Indeed, global bond markets will remain buoyed by what is now a period of global monetary easing. Despite rising in early September, global core government bond yields trended down in recent weeks. This strong momentum could threaten again the August lows in yield, especially with the ECB still to implement most of the measures it announced in September. It is difficult to see a significant improvement in investor sentiment in the short term, with the uncertainties of Brexit and the US-China trade relationship potentially persisting through year-end. While credit markets continue to perform well, the absence of any positives on the macro front could begin to erode credit fundamentals. The inability of global equity markets to make new highs is something worth watching. A rise in equity volatility would be a bearish signal for credit and could lead to widening of spreads. Portfolio: During the month, we kept the portfolio’s duration and spread duration in line with its investment universe. Benefiting from an active primary market, most of our investments was done through new issue to limit transaction cost. We kept a balanced sector allocation between financial, cyclical and defensive sector.
Any performance shown is net of the ongoing charge for the share class selected with income reinvested . Past performance is not a guide to future performance. The value of investments can fall as well as rise and you may get back less than invested. The fund can use derivatives for investment purposes. These instruments may cause periods of high volatility in the price of the shares of the fund.
|Reference index||Start date||End date|
|Performance table||Net performance||Reference index||Start date||End date|
|Risk table||Fund volatility||Benchmark volatility||Tracking error||Information ratio||Sharpe ratio||Beta||Alpha|
|Asset class||FIXED INCOME|
|Legal authority||Commission de Surveillance du Secteur Financier|
|Fund Manager||Mathieu CRANZ|
|Co-manager||. .Whole team task|
|Investment team||MT Buy & Maintain Paris|
Subscription and redemption
The subscription, conversion or redemption orders must be received by the Registrar and Transfer Agent on any Valuation Day no later than 3 p.m. Luxembourg time. Orders will be processed at the Net Asset Value applicable to such Valuation Day. The investor's attention is drawn to the existence of potential additional processing time due to the possible involvement of intermediaries such as Financial Advisers or distributors.The Net Asset Value of this Sub-Fund is calculated on a daily basis. Minimum initial investment: 5,000,000 euros or the equivalent in the relevant currency of the relevant Share class. Minimum subsequent investment: 1,000,000 euros or the equivalent in the relevant currency of the relevant Share class.