6 October 2011
L Euro High Yield*
L Euro High Yield is a mutual fund mainly invested in high-yield securities denominated in euros. The fund’s objective is to outperform its benchmark fund, the Merrill Lynch Euro High Yield Constrained Index.
The management philosophy is based on a dual strategic allocation / securities selection approach. Strategic allocation consists of establishing a portfolio profile (credit quality, allocation by sector) in line with the macro-economic environment and the management company’s forecasts. The second aspect of the process consists of selecting issuers based on an analysis of their financial profile. Fundamental analysis and the monitoring of issuers are an essential element in the management process, given the credit profiles in the investment world (rating below Baa3 for Moody’s or BBB- for S&P). Stress is placed on the issuer’s ability to repay debt in order to avoid defaults.
Since the start of the year, the fund has lost 9.64% against a loss of 6.49% for its benchmark fund (data as at 30 September 2011). The asset class has been suffering since August from investor risk-aversion movements.
In order to minimise the risk of default, diversification is an important criterion in the portfolio’s makeup: Euro High Yield offers a diversified profile with 75 issuers. Most of the fund’s securities are rated category BB or Investment Grade (nearly 2/3 of investments). The sector with the highest representation is automotive (17%), with a majority of issuers rated in category BB able to boast improving credit profiles.
At the end of September, the fund’s actuarial rate of return was 11.5% with sensitivity of 3.1.
Past performance is not a reliable indicator of future performance.
Please note: The fund’s capital is not guaranteed, its main exposure is to the following risks: rates, credit and foreign exchange.
