Artemis Funds (Lux) – Global High Yield Bond fund review of the year to 30 April 2023

The managers of Artemis Funds (Lux) – Global High Yield Bond report on the fund over the year to 30 April 2023.

Jack Holmes

Main changes to the fund

  • Many of the changes we made involved reducing the risk of the fund by switching to higher-quality bonds. CCC bonds performed very strongly at the start of 2022, so we reduced our exposure there. Examples included Selecta, United Site Services and Homepoint.
  • We added some investment grade financials, including RBC, Bank of America and Citi. These bonds are not within our core focus – being rated in the A bucket (that is, two notches above high yield). However, the yields available on them were compelling.
  • We bought a number of new issues such as Italmatch (chemicals), the AA (UK breakdown services) and Verisure (alarms).

Explaining the fund’s performance

  • The fund returned 6.5% over the period, slightly behind the benchmark (the ICE BofA Merrill Lynch Global High Yield Constrained USD Hedged Index) which returned 7.4%1.
  • The fund was badly affected in March by holding a 1.7% position in a Credit Suisse Additional Tier 1 bond, which was written down as part of the bank’s sale to UBS. Unfortunately, we relied too heavily on the bank’s healthy capital levels and underestimated the speed and scale of the reduction in confidence amongst depositors.

The wider context

  • March saw volatility return to markets driven by heightened concerns about financial stability. This was a jarring break from the more familiar worries about inflation of the past year or so. The failure, and ultimate rescue of, US regional lender Silicon Valley Bank (SVB), alerted markets to the challenges policymakers will face reversing more than a decade of quantitative easing and suppressed yields. Inevitably, concerns spread to the US regional banking sector as a whole, and soon to Europe with Credit Suisse (CS) coming into sharp focus, culminating in its sale to UBS.

Looking ahead

  • There is little doubt that the financial stability concerns which flared up in March have added a new dimension to the 2023 outlook. We have sympathy with the view that an apparent trade-off between financial stability and fighting inflation may emerge amongst central bankers or – at the very least – will be debated by markets. However, we feel that the resilience built into the global financial system is such that, in time, policy makers will be able to refocus on their commitment to fighting inflation.
  • We also continue to see strength and cautious optimism amongst the corporate sectors in which we invest. We believe our strategy of focusing on high-yield credit without taking undue duration risk as being ideally suited to the current environment.
Discrete performance, 12 months to 31 December 2022 2021 2020 2019 2018
Artemis Funds (Lux) – Global High Yield Bond  -13.5% 6.6% 4.5% N/A N/A
ICE BofA Merrill Lynch Global High Yield Constrained EUR Hedged Index -13.6% 2.1% 4.7% N/A N/A
1 Artemis/Lipper Limited, class I accumulation USD. 
*Past performance is not a guide to the future. Source: Artemis/Lipper Limited, class I accumulation EUR. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.

Jack Holmes

Manages:

‘Global high yield', 'high income', 'monthly distribution', 'short-duration strategic bond'

Jack co-manages Artemis’ 'global high yield bond' strategy, 'high income' strategy and 'short-duration strategic bond' strategies, plus the bonds element of Artemis‘ ‘monthly distribution‘ strategy.

View Profile

David Ennett

Manages:

‘Global high yield', 'High income', 'Monthly distribution', 'Strategic bond'

David co-manages Artemis‘ ‘global high yield‘, ‘monthly distribution‘ and ‘high income‘ strategies.

View Profile

Investment in a fund concerns the acquisition of units/shares in the fund and not in the underlying assets of the fund.

Reference to specific shares or companies should not be taken as advice or a recommendation to invest in them.

For information on sustainability-related aspects of a fund, visit the relevant fund page on this website.

For information about Artemis’ fund structures and registration status, visit artemisfunds.com/fund-structures

Any research and analysis in this communication has been obtained by Artemis for its own use. Although this communication is based on sources of information that Artemis believes to be reliable, no guarantee is given as to its accuracy or completeness.

Any statements are based on Artemis’ current opinions and are subject to change without notice. They are not intended to provide investment advice and should not be construed as a recommendation.

Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit artemisfunds.com/third-party-data.

Important information
The intention of Artemis’ ‘investment insights’ articles is to present objective news, information, data and guidance on finance topics drawn from a diverse collection of sources. Content is not intended to provide tax, legal, insurance or investment advice and should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security or investment by Artemis or any third-party. Potential investors should consider the need for independent financial advice. Any research or analysis has been procured by Artemis for its own use and may be acted on in that connection. The contents of articles are based on sources of information believed to be reliable; however, save to the extent required by applicable law or regulations, no guarantee, warranty or representation is given as to its accuracy or completeness. Any forward-looking statements are based on Artemis’ current opinions, expectations and projections. Articles are provided to you only incidentally, and any opinions expressed are subject to change without notice. The source for all data is Artemis, unless stated otherwise. The value of an investment, and any income from it, can fall as well as rise as a result of market and currency fluctuations and you may not get back the amount originally invested.