MARKET ENVIRONMENT

The securities held within the fund performed well during the second quarter. Concerns over the nature of inflation, on whether it is temporary or enduring, created interest rate volatility. This has not been a significant concern for the fund, as it is positioned to have low sensitivity to interest rates, notably through the exposure to fixed-to-floaters and floating rate notes. Moreover, subordinated debt, especially subordinated debt issued by the financial sector, tends to benefit from a rising rate environment. This is because the profitability of financials increases as interest rates rise, and this should lead to tighter spreads for the securities held within the fund. This is exactly what we saw during the first half of 2021. Therefore, the fund performed well once again during a period of rising interest rates. Moreover, valuations of the securities we hold still remain wider than pre-Covid-19, despite strong fundamentals. We are capturing spreads of close to 330 bps, highlighting the attractiveness of our asset class. On the Covid-19 front, we have seen vaccines rollout going on well in Europe. As such, economies have been reopening. Therefore, we believe the fund is well positioned to benefit in the second half of 2021.

We continued seeing positive developments on legacy securities, with a number of securities being called or tendered at premiums to market levels. We expect similar outcomes on other legacy securities going forward.

Q1 bank earnings were released during Q2 and demonstrated once again the resilience of European financials. This was one of the strongest earnings seasons we have seen in the last decade, as indicated by liquidity and solvency ratios of European banks, which are at an all-time high, despite the real-life stress test of the Covid-19 pandemic.

 

 

  • 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.