CF Canlife Global High Yield Bond Fund a sub-fund of CF Canada Life Investments Fund ACD s Annual Short Report for the year ended 15 August 2015

Transcription

1 CF Canlife Global High Yield Bond Fund a sub-fund of CF Canada Life Investments Fund ACD s Annual Short Report for the year ended 15 August 2015 Investment Objective and olicy The CF Canlife Global High Yield Bond Fund ( the Fund ) seeks to achieve a high current income and, as a secondary objective, capital growth (when consistent with the objective of high current income), by permanently investing not less than 85% of its assets in units of the utnam Global High Yield Bond Fund. While it is envisaged that the Fund will normally be fully invested in the utnam Global High Yield Bond Fund, the Fund may also hold up to 15% of its assets in cash or near cash. Additional information in relation to the utnam Global High Yield Bond Fund is presented below. Information Regarding utnam Global High Yield Bond Fund The below is a summary description only of utnam Global High Yield Bond Fund in which the Fund invests not less than 85% of its assets. For further information in relation to the utnam Global High Yield Bond Fund, shareholders should refer to the rospectus of the utnam World Trust which is available on request (free of charge) from the ACD. The utnam Global High Yield Bond Fund is a sub-fund of utnam World Trust, which is an umbrella unit trust and a UCITS scheme established and organised under the laws of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 2011, and is authorised by the Central Bank of Ireland. The Manager of the utnam Global High Yield Bond Fund is utnam Investments (Ireland) Limited. The Trustee of the utnam Global High Yield Bond Fund is State Street Custodial Services (Ireland) Limited. The Manager has delegated performance of the investment management function in relation to the utnam High Yield Bond Fund to the utnam Investment Advisor, The utnam Advisory Company, LLC (hereinafter the utnam Investment Advisor ). The utnam Global High Yield Bond Fund has been authorised by the Central Bank of Ireland as a master UCITS within the meaning of the relevant provisions of the UCITS Directive. It must therefore at all times have at least one feeder UCITS among its unitholders and it must not itself become a feeder UCITS or invest in a feeder UCITS. CF Canlife Global High Yield Bond Fund 1

2 Investment Objective and olicy of The utnam Global High Yield Bond Fund The utnam Global High Yield Bond Fund s investment objective is to seek high current income. Capital growth is a secondary objective when consistent with the objective of high current income. The utnam Global High Yield Bond Fund seeks to achieve this objective by investing at least two-thirds of its total assets (after deduction of ancillary liquid assets) in high-yielding, lower-rated debt securities worldwide such as those rated lower than S& s BBB or Moody s Baa and listed or traded on Recognised Exchanges (including unleveraged freely transferable loan participations securitised and traded on a Recognised Exchange, zero-coupon bonds and payment-in-kind bonds) constituting a portfolio which the utnam Investment Advisor believes does not involve undue risk to income or principal. Risk rofile The Fund has little exposure to credit or cash flow risk. There are no borrowings or unlisted securities of a material nature and so there is little exposure to liquidity risk. The main risks it faces from its financial instruments are market price, foreign currency and interest rate risk. The ACD reviews the policies for managing these risks in order to follow and achieve the Investment Objective as summarised above. Accounting and Dates Expense Type *** % A B C G Annual Management Charge Other expenses utnam Global High Yield Bond Fund Annual Management Charge* utnam Global High Yield Bond Fund other expenses** Ongoing charges figure * The Annual Management Charge for S class units in the utnam Global High Yield Bond Fund in which the Fund invests is 0.65%. However, as part of the Master-Feeder agreement 0.35% of this fee is currently rebated to the Fund. ** As part of the Master-Feeder agreement, the other expenses of the utnam Global High Yield Bond Fund are capped at %. *** The Ongoing Charges Figure shown here was an estimate of the charges. An estimate was used rather than an ex post figure due to the Fund only being launched on 18 September Interim Final Accounting 15 February 15 August 15 April 15 October Synthetic Risk and Reward Indicator Typically lower rewards Typically higher rewards Lower risk Higher risk Ongoing Charges Figure Expense Type % A B C G Annual Management Charge Other expenses utnam Global High Yield Bond Fund Annual Management Charge* utnam Global High Yield Bond Fund other expenses** Ongoing charges figure This indicator shows how much a fund has risen and fallen in the past, and therefore how much a fund s returns have varied. It is a measure of a fund s volatility. The higher a fund s past volatility the higher the number on the scale and the greater the risk that investors in that fund may have made losses as well as gains. The lowest number on the scale does not mean that a fund is risk free. The Fund has been classed as 4 because its volatility has been measured as average. This indicator is based on historical data and may not be a reliable indication of the future risk profile of this Fund. The risk and reward profile shown is not guaranteed to remain the same and may shift over time. 2 CF Canlife Global High Yield Bond Fund CF Canlife Global High Yield Bond Fund 3

3 s C Income shares Share Class A Accumulation B Income B Accumulation C Income C Accumulation G Accumulation Interim pence Final pence C Accumulation shares rice rice erformance Record A Accumulation shares rice rice rice rice B Income shares rice rice G Accumulation shares # From 18 September * To 15 August rice rice B Accumulation shares rice rice CF Canlife Global High Yield Bond Fund CF Canlife Global High Yield Bond Fund 5

4 Net Asset Value Sector Spread of Investments Date Share Class Net Asset Value Shares in Issue Net Asset Value pence Net other assets 0.38% (0.54%) A Accumulation B Income B Accumulation C Income C Accumulation G Accumulation 15,508 3,789 74, , ,729 16,936,282 14,567 3,678 69, , ,065 15,786, A Accumulation B Income B Accumulation C Income C Accumulation G Accumulation 25,681 15,674 24, ,485 2,563,738 26,455,300 24,939 16,274 23, ,206 2,456,620 25,293, Bond Funds 99.62% (99.46%) The figures in brackets show allocations at 15 August. Fund erformance to 15 August 2015 (%) Major Holdings The holding at the end of each year is shown below. 1 year Since launch* CF Canlife Global High Yield Bond Fund (3.27) 3.95 * Launch date 18 September The performance of the Fund is based on the published price per B Accumulation share which includes reinvested income. Holding % of Fund as at utnam Global High Yield Bond S class Holding % of Fund as at utnam Global High Yield Bond S class Risk Warning lease remember that past performance should not be seen as a guide to future performance and that the value of an investment and the income from it can fall as well as rise and may be affected by exchange rate variations. 6 CF Canlife Global High Yield Bond Fund CF Canlife Global High Yield Bond Fund 7

5 ACD S REORT for the year ended 15 August 2015 Important Information With effect from 1 December the manner in which the registration fee has been charged has been amended from a holder basis to a charge equal to 0.03% of the net asset value of the Fund. The revised charge is subject to a minimum of 1,500 per annum and a maximum of 100,000 per annum. In addition, a transaction fee of will be payable by the Fund. With effect from 1 July 2015 the periodic fee paid to the Depositary of the Fund was increased to 0.03% for the first 100 million of the value of the Fund, % for the next 50 million and 0.01% for the balance thereafter, subject to a minimum of 5,000 per annum plus VAT. On 17 September 2015 a new share class, the S Accumulation share class, was launched in the Fund. Note that the customer services and dealing line has now changed from to Capita Financial Managers Limited ACD of CF Canlife Global High Yield Bond Fund 8 December 2015 INVESTMENT MANAGER S REORT for the year ended 15 August 2015 The CF Canlife Global High Yield Bond Fund (the Feeder Fund ) invests in the utnam Global High Yield Bond Fund (the Master Fund ) through a master-feeder structure. CF Canlife Global High Yield Bond Fund must invest at least 85% in value of its assets in the Master Fund and throughout the year it was effectively wholly invested in the Master Fund. The below investment review relates to the Master Fund. erformance Review On a gross basis, the Master Fund portfolio produced negative returns but outperformed its benchmark during the year. From a sector perspective, an underweight allocation in metals & mining along with security selection within gaming lodging & leisure and health care were the top contributors to relative returns. At the issuer level, top-performing names included enn National Gaming as well as an underweight to eabody Energy and avoiding EL Energy. Meanwhile, underweight positioning in financials and security selection within the retail and energy sectors detracted from performance. hones4u Finance, aragon Offshore, and Milagro Oil & Gas were the biggest detractors from returns at the security level. Market Highlights During mid Q3, risk assets had rallied as investor sentiment benefited from a combination of alleviating U.S. rate concern, easing geopolitical tensions, ongoing M&A activity, and a solid earnings season. Things reversed course in September as selling pressure in high-yield intensified with a bid resurfacing in the final days of the month. Negative and fragile investor sentiment lasted into mid-october, when a number of stabilizing factors shifted fears and lead to a brief recovery as risk assets improved sharply after hitting significantly depressed levels. With oil continuing its downward trajectory and the energy sector comprising such a large part of the market, high-yield suffered in November. The OEC meeting on November 27 propelled the negative energy/oil headwind while spreads and yields moved wider. Though other macro factors like Greece and Russia caught some headlines in December, the main story for risk assets continued to focus on the dramatic sell off of crude. High yield bonds posted positive returns to begin While oil prices began to settle in at lower levels in January, a combination of positive inflows and lower U.S. Treasury yields were beneficial for total returns. February was a very strong month for the asset class as a rise in U.S. Treasury rates was trumped by spread tightening. An extension of aid to Greece following a Syriza victory and a cease-fire in Ukraine also contributed to a relatively stable macro backdrop all while low yields in Europe were spurred by the anticipation of the European Central Bank s ( ECB ) version of Quantitative Easing ( QE ). However, the technical picture turned negative in March as high yield ETF investors started to redeem. Additionally, mixed economic data left investors uncertain of when the Federal Reserve ( the Fed ) would begin to raise short term rates, which caused volatility in risky assets across the board. The trend of mixed economic data and negative flow activity continued through April, however, fading geopolitical turmoil and rising oil prices provided a tailwind for the high yield asset class. The end of spring brought higher levels of volatility across Treasuries, FX, commodities, and stocks, triggering additional outflows in high yield despite economic data which surprised on the upside. This theme of volatility continued into the summer months, as a wave of macro shocks hit the market. The three most notable early-to-mid summer events were the Greek debt crisis, the precipitous decline in Chinese stocks, and the plunge in commodity prices. All three brought significant downward pressure on high yield prices towards the end of the year, and erased some of the gains from earlier in the year. Overall, Fed narrative, commodity prices, and macro-related events continue to influence high yield performance. In this environment, the global high-yield corporate bond market, as measured by Bank of America Merrill Lynch Global High Yield Investment Grade Country Constrained Index (hedged to GB), posted a return of -0.81% for the 12 months ended 15 August CF Canlife Global High Yield Bond Fund CF Canlife Global High Yield Bond Fund 9

6 Investment Manager s Report (continued) Outlook and Strategy We continue to have a constructive view on the U.S. economy, and have witnessed consistent growth across a range of important components. In particular, consumer spending has risen considerably and is now the main source of growth in the economy. Additionally, there continues to be an increase in household formation which has supported the housing market recovery. We expect Gross Domestic roduct ( GD ) growth in the 2.5%-3.0% range in the second half of 2015, with the main risks coming from overseas. The underlying trends in the economy suggest a rate hike in September is possible, however weeks of important data have yet to be released (such as the second reading of Q2 GD, monthly housing numbers, consumer sentiment, and the annual Jackson Hole Economic olicy Summit). In Europe, the latest data suggests no major change in the trajectory of the economy. We forecast inflation to remain well below the ECB s target through 2016, and we think it is far more likely that the ECB will have to introduce a second round of QE and that it will finish the current program early. The Greece saga has subsided, and an agreement has been reached. However, questions still remain, such as the possibility of debt relief and re-elections in the country. Corporate balance sheets and overall credit fundamentals remain healthy for global high yield. We believe defaults will remain below historical averages, although there have been and may continue to be elevated levels in the energy and metals & mining sector due to depressed commodity prices. Despite a relatively hawkish Fed narrative, concerns around market liquidity (which has caused significant swings in trading levels at times), and heightened levels of volatility in global equity markets, we believe high yield spreads are still attractive. Among potential headwinds for high yield spreads, are deteriorating technicals. With that being said, we continue to hold higher cash levels in the portfolio to act as a buffer against market unease. We are broadly diversified while remaining cautious on the energy sector and believe opportunities still exist in the remaining high yield cohort. Buying and Selling Shares The ACD will accept orders to deal in the shares on normal business days between 8.30am and 5.30pm (London time) and transactions will be effected at prices determined by the following valuation. Instructions to buy or sell shares may be either in writing to: 2 The Boulevard, City West One Office ark, Gelderd Road, Leeds LS12 6NT or by telephone on Reports and Accounts This document is a short report of the CF Canlife Global High Yield Bond Fund for the year ended 15 August The full Report and Accounts for the Fund is available free of charge upon written request to Capita Financial Managers Limited, 40 Dukes lace, London EC3A 7NH and can be found on our website, by following the link Fund Information. Other Information The information in this report is designed to enable you to make an informed judgement on the activities of the Fund during the year it covers and the results of those activities at the end of the year. Canada Life Asset Management Limited Investment Manager 28 August CF Canlife Global High Yield Bond Fund CF Canlife Global High Yield Bond Fund 11

7 AUTHORISED CORORATE DIRECTOR ( ACD ) Capita Financial Managers Limited Head Office: 40 Dukes lace London EC3A 7NH Telephone: Fax: enquiries@capitafinancial.com DIRECTORS OF THE ACD C. Addenbrooke N. Boyling B. Hammond. Hugh-Smith K.J. Midl INVESTMENT MANAGER Canada Life Asset Management Limited Canada Life lace High Street otters Bar Hertfordshire EN6 5BA DEOSITARY BNY Mellon Trust & Depositary (UK) Limited The Bank of New York Mellon Centre 160 Queen Victoria Street London EC4V 4LA REGISTRARS Capita Financial Administrators Limited Customer Service Centre: 2 The Boulevard City West One Office ark Gelderd Road Leeds LS12 6NT Telephone: INDEENDENT AUDITOR Ernst & Young LL 25 Churchill lace Canary Wharf London E14 5EY MASTER FUND utnam Global High Yield Bond Fund (Regulated by the Irish European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations) MANAGER OF THE MASTER FUND utnam Investments (Ireland) Limited TRUSTEE OF THE MASTER FUND State Street Custodial Services (Ireland) Limited INVESTMENT ADVISOR OF THE MASTER FUND The utnam Advisory Company, LLC AUDITOR OF THE MASTER FUND ricewaterhousecoopers 1606 SF 15/12/2015