European High Yield Bond Portfolio (EHYBP)


Investment Objectives

The economic storm in Europe has increased volatility in the region’s credit markets, and magnified the divergence intra sector within local markets. The European high yield space is a smaller but faster growing market than in the US, increasing at over 25% per year in volume terms, which creates a more diversified universe. This growth has also created mispricing opportunities in individual credits that are not well understood by market participants.

Credit Selection

Fundamental and market-based selection approach through proprietary research and deep understanding of the European markets. The experienced Butler team is solely dedicated to this niche space and has a real edge in this market where less than 50% of the outstanding issuance is covered by brokerage research. In order to understand a company’s idiosyncratic risk, an investor must also have an intricate understanding of the local laws, covenants, cultural differences, history of management teams, corporate governance and colour on other market participants. These are areas in which Butler have the ability to add real value to managing portfolios of fixed income instruments.

Risk Management

This team believes that the opportunity lies in both bottom up-fundamental credit picking as well as taming volatility throughout the cycles. This portfolio will be long bias with risk actively managed via cash, credit and duration allocation as well as tail hedges. The team’s philosophy is to manage market exposure through active trading and portfolio repositioning.

June 30, 2018 Update

NAV 125.5513 · MTD -0.36%  · YTD -0.26%

From the 28th May 2018 to the 25th June 2018, the European High Yield Bond Portfolio returned -0.36% net, underperforming the iBoxx Eur Liquid High Yield index by 0.11% over the period. Year-to-date, the performance is -0.26% net and the outperformance against the index is 0.65%. As Italian headlines faded, spotlights turned to renewed US-centric trade tensions resulting in underperformance of sectors such as Autoparts. In the meantime the ECB reiterated their asset purchase scale-down targets, which led duration-heavy BB rated bonds to underperform B rated bucket. As happened in April, new issues had to come at relatively discounted levels to get done, and we participated in Cirsa (Spanish gaming), TDC (Danish Telecom), Energizer (US Consumer Goods) and Interxion (UK Data Services). Top performers were New look (UK Retail, +5.6pts), Chemours (US Chemicals, +2.6pts), and Senvion (German Wind sector, +2.6pts). Underperformers were Novafives (French Engineering, -5.5pts), Anacap (Italian debt services, -2.9pts), and Ceramtec (German Healthcare, -2.1pts). At the moment we remain cautious but don’t rule out increasing exposure as we enter into the summer period, which tends to seasonally benefit from the virtual closure of the primary market.

 

EHYBP Privacy Notice Download
Latest factsheet Download
Key Investor Information Document (KIID) Download
Application form Download
Supplement to the prospectus Download
Prospectus Download
Supplemental disclosure form and declaration for U.S. persons Download
Latest interim financial statements Download
UCITS Financial Audit 2017 Download
Remuneration Policy Download

Fund Identification

ISIN: IE00B9HJT617

Bloomberg: SIGEHYA ID Equity

Telekurs: N.A.

Sedol: B9HJT61

Sub-Investment Manager

Butler Investment Managers Ltd.