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Lloyds TSB Offshore Euro High Income Fund - News
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Lloyds TSB Offshore Euro High Income Fund
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Fund
News
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Lloyds TSB Offshore Euro Hi Income comment -Dec 09
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Friday, 19 March 2010
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Fund Manager Comment
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European corporate bond markets produced further gains in the fourth quarter. Investors continued to display confidence in the market and as corporate bond prices rose, the spread between the yields offered by corporate and government bonds narrowed further. But there was some evidence of profit taking towards the end of the quarter and the pace of spread tightening slowed.
Within the portfolio, the comparatively high weighting in government bonds proved negative, although the overweight position in the financials sector boosted returns. Throughout the rest of the portfolio, we have held underweight positions in most of the non-financial sectors.
The market for new issues was fairly active again in the fourth quarter and we participated in issues from a number of companies, including Heineken and HSBC. In addition, we switched our holding in a sterling issue by British American Tobacco into an equivalent euro-denominated issue.
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Lloyds TSB Offshore Euro Hi Income comment -Sep 09
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Tuesday, 15 December 2009
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Fund Manager Comment
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European corporate bond markets produced further gains in the third quarter, with yield spreads over government bonds continuing to narrow. This indicates the extent to which investors' appetite for riskier investments has increased. The rally leveled off towards the end of the month though, as investors paused for breath amid signs of profit taking.
The financial sector saw some of the strongest gains. Bank debt in particular suffered heavy losses last year and has rebounded strongly in 2009. The Fund's holdings in lower tier 2 bank debt proved highly beneficial during the third quarter, as this part of the market enjoyed some particularly strong gains. The Fund produced a very strong return over the quarter, comfortably outperforming its benchmark.
We have once again been very active in the new issues market. We purchased euro denominated issues from KPN, Anglo American, Barclays, Citigroup, and KBC, amongst others. We also acquired a small allocation in engineering company Alstom, but sold the holding for a profit shortly afterwards.
Performance was helped by holdings in the financial sector, particularly the lower tier 2 debt issued by banks. These positions in the banking and financial sectors are being maintained. We are also finding an increasing number of opportunities in sectors that are more economically sensitive, such as industrials and basic materials, where yields and valuations look attractive.
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Lloyds TSB Offshore Euro Hi Income comment -Mar 09
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Tuesday, 9 June 2009
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Fund Manager Comment
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European corporate bond markets fell back over the quarter, amid further bad news on the economic front and as investors became increasingly concerned about the ability of governments to stabilise the financial sector.
The financial sector saw some of the biggest losses. Investors were also unnerved by corporate results from the sector. However, towards the end of March, credit markets staged a partial recovery.
The secondary market remains highly illiquid. As a result, within the Fund we continued to participate in new issues. These purchases were concentrated in companies with reliable revenue streams, particularly in the telecoms and utilities sectors. Purchases included Akzo Nobel, Philip Morris, E. On and Shell.
The Fund underperformed its benchmark during the quarter. Holdings in the financial sector had a negative influence on performance. In particular, uncertainty over possible nationalisations in the UK led to heavy sales by European investors not wanting any exposure to UK financial companies. Within the portfolio, SWIP subsequently scaled back many of these positions. Overall, stock selection had a negative impact on performance.
On the basis of valuations, SWIP invested some of the Fund's off-benchmark holdings in government bonds and cash back into the corporate bond market. The overall duration of the portfolio was also lengthened.
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Lloyds TSB Offshore Euro Hi Income comment -Dec 08
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Friday, 27 March 2009
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Fund Manager Comment
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European corporate bonds continued to underperform their government bond counterparts throughout the fourth quarter. In October, the market was weak even relative to the UK, as forced sellers disposed of their more liquid assets in what is a larger market.
Yield spreads over equivalent dated government bonds continued to widen in November and December. Encouragingly, however, new issuance has begun to return to the market at attractive valuations in comparison to existing bond issues.
Purchases in October included a General Electric 2016 bond from the aforementioned distressed sellers. There were other few transactions that month as market liquidity all but dried up.
In November, the Fund participated in a number of new euro-denominated issues. These included Centrica, and BMW and Iberdrola (both sold at a healthy profit to buy Bunds and a Diageo new issue respectively). Tesco was also purchased in the secondary market.
In December, a new investment in Coca Cola Hellenic Bottling was funded by the sale of Iberdrola, the Spanish utilities group. The purchase of US telecoms operator Verizon was funded from the sale of Deutsche Telekom. Elsewhere, the Fund sold a number of financial stocks that had become expensive.
Off-benchmark holdings in government bonds were positive during the quarter. However, overweight positions in basic resources had a negative impact.
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Name Change
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Monday, 4 December 2006
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Official Announcement
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The investment parameters of the International Bond Fund were amended with effect from 2nd October 2006, with the result that the fund becomes the Euro High Income Fund.
An explanation of the changes is provided below.
Change of Currency of Underlying Assets:
The Directors intend to seek Shareholder approval to change the way in which the assets of the Fund are invested so that they are invested primarily in Euro denominated bonds, rather than a spread of different currency bonds, as is currently the case.
Change of Bond Ratings:
In order to enhance the level of income generated by the Fund's portfolio it is also proposed that the Investment Manager be permitted to invest in bonds that have been given at least a 'BBB' rating by Standard and Poor's (a leading global credit rating company) or the equivalent for other rating companies. This is in place of the current restriction of 'A' rated bonds (please see Appendix II for an explanation of Standard and Poor's credit ratings). BBB rated bonds will produce a higher income for the Fund but will also carry a higher risk, which it is intended to mitigate through active monitoring of the underlying investments.
Change of Investment Objective and Policy:
It is proposed that the investment objective of the Fund should change to 'maintain a high income through investment in a spread of fixed interest securities denominated predominately in Euro' from its current objective of 'to seek a reasonable level of income with potential for capital growth through investment in the world's bond markets' .
Change of Base Currency:
These proposals will also entail changing the base currency of the Fund from Sterling to Euro. By adopting the revised investment mandate the Investment Manager is confident of being able to achieve and maintain a level of income in Euro terms higher than can easily be achieved within the current low interest rate environment.
Risk Warnings:
Investors should be aware that, depending on their circumstances, and in particular their reference currency, the proposed changes to the Fund's base currency and underlying assets may have an effect on the current level of risk associated with this investment. Investors will need to consider the implications of investing in a Fund with a different base currency to their own reference currency. The level of income may be achieved partly by purchasing securities at prices above their ultimate redemption values. This could well be at the expense of capital, depending on the dividend policy adopted by the Company and the redemption yields available on fixed interest securities. The dividends payable by the Fund may fluctuate in value, in money terms.
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