Impact of Covid-19 on our funds

Impact of Covid-19 on our funds: from a credit standpoint and given current information – credit neutral. Our base case remains that economy weakness arising from the virus should be temporary and front-loaded. In the meantime, this will force central banks to remain highly accommodative, with a side-effect of a strong search for yield. as indicated by negative yielding debt at USD 14tr or an increase of 3tr YTD. Obviously, coronavirus is not neutral in terms of earnings growth as well as a potential disruptor of supply chain (bad news for certain sectors/corporates, HY, etc.), but once again, we expect this to be temporary. Furthermore, we expect sub-debt from financials to be somewhat immune given the combination of high steady income, strong fundamentals, supportive technical and last but not least appealing relative value.

View of recent sell-off/reason for the slight correction

While we expect impact of Covid-19 to be credit neutral for issuers held in the fund, price of the bonds held in the fund have not been completely immune by the sharp sell-off that took place in other markets this week (for example, EU equity that dropped double digit this week) and on average price of bonds held in the fund have decline on average between 2-2.5%. We feel that this price weakness should be short lived and would expect price to quickly recover. Furthermore, we are not changing our base case of +8 for the EUR fund and +9% for the USD/GBP fund – especially given the high level of income that the funds are capturing.

Update 10/03: New Article “Coronavirus: A credit Perspective” by Patrick Smouha on Gam.com

  • Please read this important legal information before proceeding.

    Information contained herein are solely for the use of the person who has accessed this information and may not be reproduced or distributed, even partially, to any other person or entity.

    The material contained herein is confidential and intended solely for the use of the persons or entities with nationality of or respectively with their residence, domicile, registered office or effective administration in a State or Country in which distribution, publication, making available or use of the information is not contrary to applicable laws or any other regulation.

    The material contained herein is aimed at sophisticated, professional, eligible, institutional and/or qualified investors/intermediaries who have the knowledge and financial sophistication to understand and bear the risks associated with the investments described.

    The information is solely product-related and does not take into account any personal circumstances and does not qualify as general or personal investment recommendation or advice. In particular, the information is given by way of information only and does not constitute a specific legal offer for the purchase or sale of financial instruments. Moreover, nothing contained herein is constitutive of any tax advice.

    Every effort has been made to ensure the accuracy of the financial information herein but the information contained herein has not been independently reviewed or verified. Therefore, Atlanticomnium SA gives no assurance, express or implied, as to whether such information is accurate, true or complete and no responsibility is accepted by Atlanticomnium SA for any errors or omissions. Third-party content is the property of its respective provider or its licensor and is protected by applicable copyright law.

    Past performance is not indicative of future performance. The price of shares/units and the income from the funds/trusts can go down as well as up and may be affected by changes in rates of exchange or financial markets fluctuation, out of the scope of Atlanticomnium SA.

    To the fullest extent permitted by law, in no event shall Atlanticomnium SA or our affiliates, or any of our directors, employees, contractors, service providers or agents have any liability whatsoever to any person for any direct or indirect loss, liability, cost, claim, expense or damage of any kind, whether in contract or in tort, including negligence, or otherwise, arising out of or related to the use of the information provided.