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SICAV

Global High Yield Bond Fund

Seeks to capture enhanced returns from a diversified global portfolio of income bearing, high yield securities.

ISIN LU0748329892 Bloomberg TRGHAHS:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

-0.77%
$1.3b

1YR Return
(View Total Returns)

Manager Tenure

-2.17%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.28
1.42%

Inception Date 26-Jun-2012

Performance figures calculated in SEK

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31-May-2020 - Mike Della Vedova, Portfolio Manager,
Certain industries are better suited to endure the unique attributes of this crisis, and our investment team continues to review credit by credit to evaluate how companies can emerge intact. History tells us that at today’s spread levels forward returns have typically been rewarding for high yield investors. We acknowledge that risks remain, and volatility will likely endure along with liquidity challenges. Downgrades and default activity are expected to increase.
Michael Della Vedova
Michael Della Vedova, Portfolio Manager

Mike Della Vedova is a global high yield portfolio manager in the Fixed Income Division. He is a portfolio manager for the Europe High Yield Bond Strategy and co-portfolio manager for the Global High Yield Bond Fund and Global High Income Bond Strategy. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Click for Manager Outlook
 

Strategy

Manager's Outlook

Significant market volatility in early 2020 at one point wiped out the gains of the previous five years. Throughout March, the market was in price discovery mode, with certain bonds experiencing double-digit declines and securities in the secondary market taking time to catch up, price discrepancies across high yield benchmarks were evident.

Initial market panic and losses gave way to more rational trading activity toward the end of March, partly due to the Fed's supportive policies. Certain industries are better suited to endure the unique attributes of this crisis, and the investment team continues to review credit by credit to evaluate how companies can emerge intact. Our analysts have been speaking with management teams daily to assess changing market and economic conditions and the ramifications for companies.

History tells us that at today's spread levels 12-month forward returns have never been negative and, moreover, have typically been rewarding for high yield investors. Furthermore, current market levels have historically presented attractive buying opportunities. We acknowledge that risks remain, and volatility will likely endure along with liquidity challenges. Downgrades and default activity will increase.

As always, we aim to deliver high current income while seeking to contain the volatility inherent in this market. Our team maintains a commitment to credit research and risk-conscious investing that has led to favorable returns for our high yield clients over various market cycles.

Investment Objective

To maximise the value of its shares through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of high yield corporate bonds from issuers around the world, including emerging markets.

Investment Approach

  • Focus on BB/B securities, with a measured allocation to lower-quality bonds when valuations are compelling.
  • Proprietary fundamental research is key — emphasis on industries that enjoy stable cash flow and rational competitive environments.
  • Extensive analyst interaction across sectors and asset classes promotes broad credit perspective.
  • Disciplined risk management practices employed in conjunction with broad portfolio diversification to manage risk profile.

Portfolio Construction

  • Diversified portfolio structure of high yield corporate bonds: 250-350 issuers
  • Industry exposure typically will range +/- 3% around benchmark weight
    • Conservative exposure guidelines to individual issuers:
    • BB issuer: 3% maximum
    • B issuer: 2% maximum
    • CCC issuer: 1% maximum

Performance (Class Ah | SEK)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Fund % -2.17% -0.77% 0.79% 3.27% -6.80%
Indicative Benchmark % -3.65% -0.32% 1.76% 4.06% -8.20%
Excess Return % 1.48% -0.45% -0.97% -0.79% 1.40%

Inception Date 26-Jun-2012

Manager Inception Date 31-Dec-2019

Indicative Benchmark: J.P. Morgan Global High Yield Index Hedged to SEK

Data as of  31-May-2020

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -10.07% -3.18% -0.68% 2.15%
Indicative Benchmark % -11.56% -2.57% 0.45% 3.02%
Excess Return % 1.49% -0.61% -1.13% -0.87%

Inception Date 26-Jun-2012

Indicative Benchmark: J.P. Morgan Global High Yield Index Hedged to SEK

Data as of  31-Mar-2020

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 02-Jul-2020 Quarter to DateData as of 02-Jul-2020 Year to DateData as of 02-Jul-2020 1 MonthData as of 31-May-2020 3 MonthsData as of 31-May-2020
Fund % 0.70% 0.70% -6.09% 4.21% -5.02%
Indicative Benchmark % 0.62% 0.62% -6.25% 4.70% -6.46%
Excess Return % 0.08% 0.08% 0.16% -0.49% 1.44%

Inception Date 26-Jun-2012

Indicative Benchmark: J.P. Morgan Global High Yield Index Hedged to SEK

Indicative Benchmark: J.P. Morgan Global High Yield Index Hedged to SEK

Performance figures calculated in USD

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

31-May-2020 - Mike Della Vedova, Portfolio Manager,
High yield bonds strongly advanced for the second consecutive month in May. The U.S Federal Reserve’s supportive policies, anticipation that the worst of the coronavirus-related economic crisis may have passed, and a rally in oil prices bolstered the performance of risk assets and the more speculative parts of the high yield market. Steady inflows helped the market absorb a heavy slate of new issuance, and credit spreads tightened to levels not seen since early March. Energy soundly outperformed as nearly all below investment-grade industries generated gains, and B rated bonds surpassed other quality tiers. Within the portfolio, credit selection in the gaming and lodging segment was a top contributor to relative performance. Security selection and our overweight allocation in broadcasting was also supportive. However, the portfolio’s reserves allocation, which is necessary for liquidity purposes, weighed on relative results in the strong performance environment. Our overweight position in cable operators also hurt.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 19.26% Was (30-Apr-2020) 20.19%
Other View Top 10 Issuers

Monthly data as of 31-May-2020

Holdings

Total
Holdings
410
Largest Holding Avantor 2.12% Was (31-Dec-2019) 1.80%
Top 10 Holdings 11.00%
Other View Full Holdings Quarterly data as of 31-Mar-2020

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating Short Term BB Rated
By % 4.59% -10.43%
Fund 4.59% 26.62%
Indicative Benchmark 0.00% 37.05%

Average Credit Quality

B

Monthly Data as of 31-May-2020
Indicative Benchmark:  J.P. Morgan Global High Yield Index

Sources for Credit Quality Diversification: Moody's Investors Service and Standard & Poor's (S&P) split ratings (i.e. BB/B and B/CCC) are assigned when the Moody's and S&P ratings differ. Short-Term holdings are not rated.

Maturity View maturity analysis

  Largest Overweight Largest Underweight
Maturity 5-7 Years 1-3 Years
By % 8.24% -10.40%
Fund 40.21% 5.64%
Indicative Benchmark 31.97% 16.04%

Weighted Average Maturity

6.12 Years

Monthly Data as of 31-May-2020
Indicative Benchmark:  J.P. Morgan Global High Yield Index

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration Under 1 Year 3-5 Years
By % 8.06% -8.43%
Fund 16.79% 30.46%
Indicative Benchmark 8.73% 38.89%

Weighted Average Duration

3.14 Years

Monthly Data as of 31-May-2020
Indicative Benchmark:  J.P. Morgan Global High Yield Index

31-Mar-2020 - Mike Della Vedova, Portfolio Manager,

Our fundamental credit research capabilities enabled us to avoid many of the market's weakest names while seeking opportunities to upgrade the portfolio at attractive prices. While the overall portfolio's credit quality did not change, the investment team added to names in more defensive sectors such as cable operators and wireless communications.

Defensive Positions Augmented

In the cable operators segment, we purchased Charter Communications, a blue chip cross-over credit with potential for further positive credit migration. The company should continue generating steady growth in earnings and free cash flow, and benefits from significant scale as the second-largest U.S. cable operator. Charter Communications is led by a high-quality management team and backed by Liberty, a quasi-sponsor with a significant equity investment and an impressive track record.

In the wireless industry, as the merger between Sprint and T-Mobile looked to be coming together after being delayed in the courts, we took the opportunity to add to both bond complexes at attractive levels. The new company will be called T-Mobile and issue bonds rated investment grade with its stated intent of obtaining investment-grade status at the issuer level. While integration risk exists, the new entity will have breadth and depth in its spectrum network, positioning itself to be a strong competitor in the wireless space in the coming years.

Attractive Opportunities in Fallen Angels

We added exposure to fallen angels including Kraft Heinz at a discount. These companies were downgraded for a reason. In the case of Kraft Heinz, an over-levered balance sheet and underinvestment in the business resulted in declining profitability. However, its size and scale are unique in the high yield market. Kraft Heinz had a market cap of USD 32.8 billion and generated USD 25 billion in revenues in 2019. We are continually assessing the market for higher quality fallen angels.

Energy Positioning Adjusted

We reduced our energy exposure over the quarter. The industry was completely repriced as energy index spreads widened beyond 2000 basis points alongside a 65% decline in oil prices after Saudi Arabia boosted production in early March despite waning demand. We sold names that we believe may not be able to survive in an energy landscape that had dramatically changed in a short period of time, and we used the opportunity to upgrade the credit quality within our energy allocation. Our analysts communicated with management teams throughout the period, and many energy issuers took quick prudent steps to cut expenses.�

Industry

Total
Industries
29
Largest Industry Cable Operators 12.62% Was (30-Apr-2020) 13.23%
Other View complete Industry Diversification

Monthly Data as of 31-May-2020

Indicative Benchmark: J.P. Morgan Global High Yield Index

Largest Overweight

Cable Operators
By7.91%
Fund 12.62%
Indicative Benchmark 4.71%

Largest Underweight

Services
By-2.69%
Fund 4.51%
Indicative Benchmark 7.20%

Monthly Data as of 31-May-2020

31-May-2020 - Mike Della Vedova, Portfolio Manager,
We are currently overweight cable operators, relative to the market index, because these issuers generally exhibit more defensive characteristics due to subscription-based, recurring-revenue business models. Potential M&A activity within cable and wireless could also create further opportunities, in our view. We are also overweight utilities, a more defensive industry given current market conditions. Conversely, we are underweight energy as weaker global demand is keeping oil prices suppressed.

Countries

Total
Countries
20
Largest Country United States 78.83% Was (30-Apr-2020) 79.19%
Other View complete Country Diversification

Monthly Data as of 31-May-2020

Indicative Benchmark: J.P. Morgan Global High Yield Index

Largest Overweight

United States
By6.58%
Fund 78.83%
Indicative Benchmark 72.25%

Largest Underweight

Brazil
By-2.17%
Fund 2.06%
Indicative Benchmark 4.23%

Monthly Data as of 31-May-2020

Currency

Total
Currencies
3
Largest Currency U.S. dollar 99.82% Was (30-Apr-2020) 99.91%
Other View complete Currency Diversification

Monthly Data as of 31-May-2020

Indicative Benchmark : J.P. Morgan Global High Yield Index

Largest Overweight

euro
By 0.13%
Fund 0.13%
Indicative Benchmark 0.00%

Largest Underweight

U.S. dollar
By -0.18%
Fund 99.82%
Indicative Benchmark 100.00%

Monthly Data as of 31-May-2020

Team (As of 02-Jul-2020)

Michael Della Vedova

Mike Della Vedova is a global high yield portfolio manager in the Fixed Income Division. He is a portfolio manager for the Europe High Yield Bond Strategy and co-portfolio manager for the Global High Yield Bond Fund and Global High Income Bond Strategy. He is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Mike’s investment experience began in 1994, and he has been with T. Rowe Price since 2009, beginning in the Fixed Income department. Prior to this, Mike was cofounder and partner of Four Quarter Capital, a credit hedge fund focusing on below investment-grade European corporate debt. Mike also was employed by Muzinich & Company as a senior analyst and assistant portfolio manager in London.

Mike earned an LL.B. and a B.Com. in finance from the University of New South Wales and a Graduate Diploma in Legal Practice (GDLP) from the University of Technology, Sydney. He also was admitted as a solicitor to the Supreme Court of New South Wales.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    10
  • Years investment
    experience
    26
Rodney M.  Rayburn, CFA

Rodney Rayburn is a portfolio manager in the Fixed Income Division, managing the Credit Opportunities and High Yield Bond Strategies. He is president of the Credit Opportunities Fund, Inc. He also is executive vice president of the High Yield Fund, Inc., and Institutional Income Funds, Inc., and chairman of their respective Investment Advisory Committees. He is a member of the Investment Advisory Committee for the Balance Fund. Rodney is a vice president of T. Rowe Price Associates, Inc., T. Rowe Price Group, Inc., and T. Rowe Price Trust Company.

Rodney’s investment experience began in 1999, and he has been with T. Rowe Price since 2014, beginning in the Fixed Income Division as a high yield analyst focused on distressed and special situations. In 2015, he was promoted to portfolio manager on the High Yield team. Prior to T. Rowe Price, Rodney was employed by Värde Partners as a managing director, and he was actively involved in performing and nonperforming loans, bonds, and reorganized equities across a variety of industries. He also was a senior investment analyst at Stark Investments.

Rodney earned a B.S. in economics from the Georgia Institute of Technology and an M.B.A. in finance and economics from The University of Chicago, Booth School of Business. Rodney also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Fund manager
    since
    2020
  • Years at
    T. Rowe Price
    5
  • Years investment
    experience
    20

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 115 basis points 1.24%
Class I $2,500,000 $100,000 $0 0.00% 60 basis points 0.64%
Class Jd $10,000,000 $0 $0 0.00% 0 basis points 0.02%
Class Q $1,000 $100 $100 0.00% 60 basis points 0.68%
Class Sd $10,000,000 $0 $0 0.00% 0 basis points 0.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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