Fund

AXIOMA Leveraged Bond Fund

AXIOMA Leveraged Bond Fund

Performance

October 2018
  • Growth of $100 investment
  • Monthly return

Period

Performance, per period *The percentage of Not Rated bonds as of 28.09.2018 is 0.7%.

Historical volatility4.8% p.a.
1M-0.7%
3M-0.7%
YTD-2.5%
201710.3%
201613.9%
201510.4%
Since inception6.5% p.a.
Period
Performance, per period *The percentage of Not Rated bonds as of 28.09.2018 is 0.7%.
1M
-0.7%
3M
-0.7%
YTD
-2.5%
2017
10.3%
2016
13.9%
2015
10.4%
Since inception
6.5% p.a.

Investment objective

The investment objective of the Fund is to generate attractive risk-adjusted return under prudent investment management with the aim of exploiting inefficiencies in fixed income markets worldwide.

The investment objective of the Fund is to generate attractive risk-adjusted return under prudent investment management with the aim of exploiting inefficiencies in fixed income markets worldwide.

Top 5 issuers Rating Weight
Cash/leverage 1.6%

VimpelCom

BB 2.7%

Banco Santander

A- 2.3%

Petroleos Mexicanos

BBB+ 1.7%

Lukoil

BBB 1.7%

Gazprom

BBB- 1.7%

Allocation October 2018

14% Russia

13% Asia Pacific

3% CIS

10% Developed Europe

27% Latin America

9% North America

16% Middle East / Africa

8% Emerging Europe

Fund details October 2018

AuM $84’336'315.23
ISIN (B2) KYG0750S1378
Currency USD
Type Fixed Income, open-ended
Coupons Reinvested
Credit risk Low (average Fund’s credit rating BB+ -BBB)
Leverage 0-100%
Management fee 0.75% p.a.
Performance fee 15%, HWM
Launch date November 27, 2015
Incorporation Cayman Islands
Investment manager AXIOMA Wealth Management AG (Switzerland)
Custodian/prime-broker Credit Suisse AG (BBB+) (Switzerland)
Administrator Apex Fund Services (Malta)
Valuation Monthly
Minimum subscription $100’000
Subscription/Redemption Monthly, 5 BD notice
Target return (2018) 6-8% p.a.

Commentary

October 2018

September has proved to be a good month for most risk assets, including our Fund which added 1.2%. Credit spreads tightening both compensated for US treasuries yields rise and resulted in some price rally. Turkish and Argentinian bonds have managed to recuperate from August sell off on the back of positive local news and were among best performers. Turkish bonds enjoyed a surge in demand after unexpected key interest rate increase (13/09) and new economic program presentation (20/09). Turkish CB raised interest rate by 625 bp up to 24% despite President R. Erdogan’s call to stimulate the economy through keeping rates low, thus demonstrating its independency. The new economic program described main actions to stem the crisis including government spending cut by EUR 8.5 bln to trim the budget deficit and tame inflation. “Realistic macro targets” and “right action plans” became an important signal for the markets. The rumoured release verdict in the US pastor case which could take place in October may bring a thaw in Turkey–United States relations. The sell-off did not make us reconsider our exposure to Turkey (8%) on the premise that full isolation of the country was highly unlikely. We expect elevated volatility in this segment to continue as the country tackles big issues like cutting costs, curbing inflation and promoting economic growth, which can take months or even years to solve, but not to the extent seen in August – at least not in the near term. To no surprise of the market, the US Federal Reserve’s two-day policy meeting held on 25–26 September ended with a decision to hike the benchmark interest rate by a quarter-point to 2.25%. In his statement, the Fed Chairman confirmed the FOMC's intention to continue with the policy of gradual rate increases. Economic forecasts saw no major change, save for the 2021 data being added. Overall, the trend of gradually slowing economic growth and stable inflation at around 2% is clear. Recent economic data was stronger than expected and resulted in UST curve parallel shift by 20 bp up by the end of the month. This month, the markets were still surpressured by the trade war rhetoric between the US and China. The United States placed 10% tariffs on Chinese goods worth $200 bn starting September 24, 2018 and warned that they would be increased to 25% by January 1, 2019 without an agreement in the trade dispute. A quick compromise is becoming more and more unlikely leaving the markets exposed to higher volatility. As of the end of September the cash weight in the Fund was 1.7%, the average yield to maturity was 5.2% and average duration was 4.8 years. We took part in the primary placement of National Bank of Oman (Baa3/BB+) bonds, which were placed at 5.74% yield to maturity in 2023. We rely mostly on the coupon income till the end of the year, but believe that some narrowing of credit spreads is still possible, which will let us partially make up for the negative performance since the start of the year.

September has proved to be a good month for most risk assets, including our Fund which added 1.2%. Credit spreads tightening both compensated for US treasuries yields rise and resulted in some price rally. Turkish and Argentinian bonds have managed to recuperate from August sell off on the back of positive local news and were among best performers. Turkish bonds enjoyed a surge in demand after unexpected key interest rate increase (13/09) and new economic program presentation (20/09). Turkish CB raised interest rate by 625 bp up to 24% despite President R. Erdogan’s call to stimulate the economy through keeping rates low, thus demonstrating its independency. The new economic program described main actions to stem the crisis including government spending cut by EUR 8.5 bln to trim the budget deficit and tame inflation. “Realistic macro targets” and “right action plans” became an important signal for the markets. The rumoured release verdict in the US pastor case which could take place in October may bring a thaw in Turkey–United States relations. The sell-off did not make us reconsider our exposure to Turkey (8%) on the premise that full isolation of the country was highly unlikely. We expect elevated volatility in this segment to continue as the country tackles big issues like cutting costs, curbing inflation and promoting economic growth, which can take months or even years to solve, but not to the extent seen in August – at least not in the near term. To no surprise of the market, the US Federal Reserve’s two-day policy meeting held on 25–26 September ended with a decision to hike the benchmark interest rate by a quarter-point to 2.25%. In his statement, the Fed Chairman confirmed the FOMC's intention to continue with the policy of gradual rate increases. Economic forecasts saw no major change, save for the 2021 data being added. Overall, the trend of gradually slowing economic growth and stable inflation at around 2% is clear. Recent economic data was stronger than expected and resulted in UST curve parallel shift by 20 bp up by the end of the month. This month, the markets were still surpressured by the trade war rhetoric between the US and China. The United States placed 10% tariffs on Chinese goods worth $200 bn starting September 24, 2018 and warned that they would be increased to 25% by January 1, 2019 without an agreement in the trade dispute. A quick compromise is becoming more and more unlikely leaving the markets exposed to higher volatility. As of the end of September the cash weight in the Fund was 1.7%, the average yield to maturity was 5.2% and average duration was 4.8 years. We took part in the primary placement of National Bank of Oman (Baa3/BB+) bonds, which were placed at 5.74% yield to maturity in 2023. We rely mostly on the coupon income till the end of the year, but believe that some narrowing of credit spreads is still possible, which will let us partially make up for the negative performance since the start of the year.