The Sub-Fund's objective is to achieve optimum long-term capital growth by investing in debt securities traded on regulated capital and money markets. In particular, the Sub-Fund aims to outperform the index.
October saw credit spreads widen significantly both in Europe and in US, making it one of the worst month of the year with March and June. Looking closer at this market move, the decompression between BBB and A credit spreads has been strong, highlighting the risk aversion among fixed income investors. Primary market issuance has been subdued in comparison with the rest of 2018 as equity market volatility forced many issuers to stay on the sideline and wait for a better window. Investment grade corporate spreads ended the month 10 bps higher in the US and 15 bps higher in the Eurozone. High yield CDS crossoveer indices widened by 45 over the month. In terms of sector, Autos were the main underperformers both in US and Europe. Concerns over the potential trade war with China, combined with fears of a slowdown in global growth created a sell-off in equities markets led investors to question central banks' forward guidance. The probability of the a US rate hike in December priced by the forward curve fell to 70% at the end of the month (from above 90% in December). Regarding the ECB, there was no surprise at the October meeting with the deposit rate left unchanged at -0.4% and policy guidance re-affirmed. The purchasing program is still projected to end in December, subject to incoming data. Nonetheless, the ECB acknowledged increased headwinds for the growth outlook in Europe.
(1) The rating grades the funds on a scale from 1 to 7. This rating system is based on the average fluctuations of the net asset value over the past five years. It corresponds to the variation range of the portfolio upwards and downwards. If the net asset value is less than 5 years old, the rating is determined by other regulatory calculation methods. Historical data such as those used to calculate the rating may not be a reliable indication of the future risk profile. The current category is neither a guarantee nor an objective. Category 1 does not signify a risk-free investment.