SICAV

European High Yield Bond Fund

Research-driven, targeting consistent high income.

ISIN LU1258030169 Bloomberg TRPGHQH:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(EUR)

0.68%
€208.5m

1YR Return
(View Total Returns)

Manager Tenure

0.71%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.31
2.19%

Inception Date 20-Jul-2015

Performance figures calculated in CHF

Other Literature

31-Aug-2020 - Michael Della Vedova, Portfolio Manager,
The combination of the European Central Bank’s accommodative policy stance and the large fiscal package agreed by European Union leaders should be supportive for further gains in the asset class. However, we are mindful of risks that could trigger volatility such as the possibility of second waves in the coronavirus and further lockdowns. In this environment of heightened uncertainty, we believe fundamental research and individual security selection remains immensely important.
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

We believe the backdrop could remain favorable for European high yield if infection rates in Europe stay under control and economies continue to reopen. Although much the of the recovery has already been priced in, the recent upside surprises in the data add optimism that the recovery will continue on a "V-shaped" path, creating room for European high yield markets to tighten further in the coming months.

However, the coronavirus and its wider impact remains the key risk to European high yield markets. Valuations are not as attractive across the board as they were a few months ago. This could result in some near-term spread widening during summer when market liquidity is traditionally lighter. Current levels also leave the market more susceptible to a deterioration in sentiment should signs of a second wave of coronavirus infections start to emerge. Trade tensions between the U.S. and either China or European countries forms another potential trigger. �

While we don't expect any substantial new monetary stimulus measures in the coming months, the strong support from major central banks and governments should keep market technicals supportive. This could keep any bouts of volatility from deteriorating into the sharp sell-offs we saw in the first quarter. Instead, we expect to see greater discrepancy between names with strong and weak fundamentals. Even in a favorable backdrop, the broad-based recovery in the second quarter indicates that ongoing performance will likely rely more on bottom-up research-based security selection rather than wider beta positioning.

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 that are denominated in European currencies.

Investment Approach

  • The fund focuses primarily on European currency-denominated corporate debt issued by below investment-grade companies.
  • Invests mainly in BB and B rated bonds, with the ability to purchase lower-quality securities when compelling valuation and risk/reward opportunities arise.
  • The fund integrates fundamental proprietary research at the corporate bond, sovereign, and equity levels. This integral collaboration provides a holistic view of a company’s capital structure and management team, as well as its position in the larger market environment unique to each country.
  • Research focuses on quantitative and qualitative factors that drive an independent credit rating. Analysts look to identify long-term potential for balance sheet and external rating improvements while adhering to strict risk management practices.
  • Target excess-return will be primarily driven by individual security selection and, secondarily, by relative sector and credit quality allocations.

Portfolio Construction

  • At least 80% of assets will be invested in securities denominated in European currencies—mainly the euro and the pound.
  • Currency exposure is fully hedged back to the euro.
  • Up to 20% of assets may be invested outside of European currencies, including U.S. dollar high yield and investment-grade corporate bonds.
  • Target tracking error: 200–400 basis points

Performance (Class Qn | CHF)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 0.71% 0.68% 2.81% 2.54%
Indicative Benchmark % -0.47% 1.69% 3.49% 3.11%
Excess Return % 1.18% -1.01% -0.68% -0.57%

Inception Date 20-Jul-2015

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to CHF

Data as of  31-Aug-2020

Performance figures calculated in CHF

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % -2.07% -0.36% N/A 1.76%
Indicative Benchmark % -2.44% 0.99% N/A 2.56%
Excess Return % 0.37% -1.35% N/A -0.80%

Inception Date 20-Jul-2015

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to CHF

Data as of  30-Jun-2020

Performance figures calculated in CHF

Recent Performance

  Month to DateData as of 25-Sep-2020 Quarter to DateData as of 25-Sep-2020 Year to DateData as of 25-Sep-2020 1 MonthData as of 31-Aug-2020 3 MonthsData as of 31-Aug-2020
Fund % -1.23% 3.03% -2.43% 2.06% 6.56%
Indicative Benchmark % -1.01% 2.16% -3.11% 1.40% 5.06%
Excess Return % -0.22% 0.87% 0.68% 0.66% 1.50%

Inception Date 20-Jul-2015

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to CHF

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to CHF

Performance figures calculated in CHF

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-Aug-2020 - Michael Della Vedova, Portfolio Manager,
European high yield bonds continued their run of positive monthly returns in August. Spreads ended the month tighter as optimism surrounding the development of a vaccine for the coronavirus and a better-than-expected earnings season boosted investors’ appetite for risk. These factors overshadowed concerns about the marked rise in coronavirus cases across many European countries. Within the portfolio, our security selection decisions had a strong positive impact, particularly within the media sector. This was led by ASR Media and Sponsorship SpA, a subsidiary of Italian football club AS Roma, which has benefitted from the reopening of the eurozone economy. Security selection by rating bracket also made a favourable contribution, largely due to our holdings in the B rated segment of the market that continued to perform well amid the more supportive backdrop for risk assets.

Holdings

Issuers

Top
Issuers
10
Top 10 Issuers 28.88% Was (31-Jul-2020) 28.98%
Other View Top 10 Issuers

Monthly data as of 31-Aug-2020

Holdings

Total
Holdings
86
Largest Holding Cabot Financial Luxembourg 3.22% Was (31-Mar-2020) 3.42%
Top 10 Holdings 26.44%
Other View Full Holdings Quarterly data as of 30-Jun-2020

Quality Rating View quality analysis

  Largest Overweight Largest Underweight
Quality Rating B Rated BB Rated
By % 25.18% -52.86%
Fund 48.46% 16.74%
Indicative Benchmark 23.28% 69.60%

Average Credit Quality

B

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

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 7-10 Years 3-5 Years
By % 7.58% -7.07%
Fund 19.22% 34.51%
Indicative Benchmark 11.64% 41.58%

Weighted Average Maturity

5.20 Years

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

Duration View duration analysis

  Largest Overweight Largest Underweight
Duration 1-3 Years 3-5 Years
By % 13.97% -19.18%
Fund 44.56% 26.28%
Indicative Benchmark 30.59% 45.46%

Weighted Average Duration

2.91 Years

Monthly Data as of 31-Aug-2020
Indicative Benchmark:  ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

30-Jun-2020 - Michael Della Vedova, Portfolio Manager,

Following the March volatility, valuations were attractive on a historical basis, and we drew on our bottom-up fundamental research to identify names that we felt offered long-term potential and had possibly oversold. Primary market activity increased as the second quarter progressed, offering additional potential opportunities. However, we remained selective and stayed focused on names with stable fundamentals rather than chasing market direction.��

Long-term credit convictions drive industry allocation

Our research-based, flexible approach will remain important going forward as we expect to see greater market emphasis on fundamentals. Therefore, we maintain an overweight position in the cable and satellite TV sector, which benefits from secular trends in media consumption and stable revenue streams. Although the sector did not perform as well as more higher-beta sectors during the second-quarter rebound, we continue to believe it will exhibit sustained longer-term performance. Our corresponding underweight to wirelines made a positive impact on performance during the quarter, and we maintain our conviction that many names in the sector face longer-term secular headwinds.

B rated names continue to offer attractive relative value

Our overall rating allocation is a by-product of our bottom-up security selection. While the near term could see further swings in market direction, we continue to identify names within the B rated category that offer attractive valuations relative to favorable fundamentals. These convictions drive our overweight exposure to the rating bracket. We hold a corresponding underweight to the BB bracket, instead prioritizing companies within brackets that offer long-term performance potential.

Sovereign views and policies are a key input to risk assessment

Proprietary sovereign views serve as a key input in our overall risk assessment. Our research-based flexible approach will be particularly important going forward. As different fiscal, monetary, and health responses play out between countries, our ability to capture dislocations can help avoid further volatility while being best positioned for a continued recovery. �

Despite the recent improvement in the European economy, we could still see an increase in European corporate defaults. An additional layer of complexity is divergent bankruptcy policies and recovery rates across countries, highlighting the importance of an active approach to high yield investing. We believe our research in this area helps us account for the different levels of risk related to variance in default and recovery policies and where spread levels offer the best compensation for these risks. Our holistic view of capital structures and willingness to invest in holding companies is reflected in an allocation to companies domiciled in Luxembourg. Any non-euro-denominated bonds are fully hedged back to the euro.

Industry

Total
Industries
26
Largest Industry Financial Services 14.25% Was (31-Jul-2020) 14.42%
Other View complete Industry Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

Largest Overweight

Financial Services
By9.26%
Fund 14.25%
Indicative Benchmark 4.99%

Largest Underweight

Automotive
By-5.90%
Fund 5.59%
Indicative Benchmark 11.49%

Monthly Data as of 31-Aug-2020

31-Aug-2020 - Michael Della Vedova, Portfolio Manager,
We maintain an overweight position in the cable and satellite TV sector. This positioning is based on expectations that this sector will benefit over the long term from secular trends in media consumption and stable, recurring revenue business models. Conversely, we remained underweight the automotive sector due to concerns over long-term industry disruption, despite its recent bounce back from a difficult first quarter

Countries

Total
Countries
20
Largest Country United Kingdom 24.03% Was (31-Jul-2020) 24.30%
Other View complete Country Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark: ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

Largest Overweight

United Kingdom
By10.82%
Fund 24.03%
Indicative Benchmark 13.21%

Largest Underweight

Italy
By-7.29%
Fund 4.82%
Indicative Benchmark 12.10%

Monthly Data as of 31-Aug-2020

30-Sep-2017 - Michael Della Vedova, Portfolio Manager,
We do not expect to add value via currency management and typically hedge our non-euro exposure back to euros to limit volatility, keeping the focus on credit selection.

Currency

Total
Currencies
5
Largest Currency euro 99.79% Was (31-Jul-2020) 99.83%
Other View complete Currency Diversification

Monthly Data as of 31-Aug-2020

Indicative Benchmark : ICE BofAML European Currency High Yield Constrained Excluding Subordinated Financials Index Hedged to EUR

Largest Overweight

euro
By 9.98%
Fund 99.79%
Indicative Benchmark 89.80%

Largest Underweight

British pound sterling
By -10.04%
Fund 0.16%
Indicative Benchmark 10.20%

Monthly Data as of 31-Aug-2020

The fund is fully hedged back to euro, although direct exposure may total less than 100%. It is important to note that there can be no assurances that the currency hedging employed will fully eliminate the shareholder's exposure to exchange rate fluctuations.

31-Jul-2017 - Michael Della Vedova, Portfolio Manager,
We do not expect to add value via currency management and typically hedge our non-euro exposure back to euros to limit volatility, keeping the focus on credit selection.

Team (As of 05-Aug-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
    11
  • Years investment
    experience
    27
Michael Lesesne

Michael Lesesne is a global high yield portfolio specialist in the Fixed Income Division. He supports the High Yield, Floating Rate Bank Loan, and Credit Opportunities Strategies, working closely with clients, prospects, and consultants. Michael is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price Associates, Inc.

Michael’s investment experience began in 1991, and he has been with T. Rowe Price since 2012, beginning as a global high yield portfolio specialist in the Fixed Income Investment Specialists department. Prior to T. Rowe Price, Michael was employed by Lord Abbett as a partner and director of credit research. Before that, Michael was a senior high yield credit analyst at Weiss, Peck & Greer and at TIAA-CREF.

Michael earned a B.A. in business economics from Brown University and an M.B.A. in finance from Columbia Business School.

  • Years at
    T. Rowe Price
    8
  • Years investment
    experience
    29

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (EUR) Minimum Subsequent Investment (EUR) Minimum Redemption Amount (EUR) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A €1,000 €100 €100 5.00% 115 basis points 1.28%
Class I €2,500,000 €100,000 €0 0.00% 60 basis points 0.67%
Class Q €1,000 €100 €100 0.00% 60 basis points 0.71%
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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