Kempen Lux Euro Sustainable Credit Fund - Class AN

Profile

Kempen International Funds SICAV - Kempen (Lux) Euro Sustainable Credit Fund (the Fund) invests primarily in credits that have an investment grade rating (of minimal BBB-) and are denominated in Euros. In addition, these companies must comply with strict sustainability criteria. The Fund may invest a small part in credits that are not included in the benchmark.

The benchmark, the Markit iBoxx Euro Corporates Index, only includes bonds with an investment grade rating. The Fund aims to earn a higher total long term return than the benchmark by implementing an active investment policy. In order to achieve this, a diversified portfolio is constructed and investment risks are continuously monitored. Investments are selected on the basis of extensive analysis of the terms and conditions of the bond issues.

In the interest of the shareholders it has been decided to soft open the Fund as per 28 June 2018. As per June 2018 the Fund will continue to accept daily inflow below EUR 10 million from all investors. For investments greater than EUR 10 million please contact the Fund’s relationship manager. Redemptions will still be possible. More information about the soft open can be found in the Notice to shareholders in the tab Documents.

Management team

Alain van der Heijden, Rik den Hartog, Harold van Acht, Sipke Moes, Luuk Cummins, Pim van Mourik Broekman, Quirijn Landman, Marco Zanotto

Performance per 2019-04-30 (rebased)

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Performance per 2019-04-30

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  Fund Benchmark
1 month 0.7 % 0.7 %
3 months 2.8 % 2.8 %
This year 3.9 % 4.0 %
2018 -0.4 % -0.8 %
Since inception (on annual basis) i 3.5 % 3.1 %
Performance is shown after deduction of ongoing charges and including the reinvestment of dividend that has been paid out. The value of your investments may fluctuate. Past performance provides no guarantee for the future.
More information can be found on the documents page of this fund

Key figures

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Total fund size
EUR 234.52 M 2019-04-30
Share class size
EUR 0.06 M 2019-04-30
Number of shares
2,500 2019-04-30
Net Asset Value i
EUR 25.88 2019-05-21

Fund characteristics per 2019-04-30

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  Fund Benchmark
Number of holdings 251 2486
Duration i 5.2 5.0
Yield to maturity 0.9 % 1.0 %

Market developments per 2019-04-30

In April, the spread on the iBoxx Euro Corporate Index tightened by 18 basis points to 122 basis points above the government bond curve. The index earned an absolute return of +0.71%. German 10-year government bond yields closed April at +0.01%, an increase of 8 basis points compared to the end of March.

The rebound in government bond yields in April reflected a greater risk appetite amongst investors and a generally more upbeat sentiment in capital markets. The latter appeared to be driven by the release of economic data which reduced concerns about a synchronised global economic slowdown, as well as reassuring Q1 earnings reports from both financial and non-financial companies.

Whilst Eurozone aggregate manufacturing PMIs continue to weaken, especially in Germany, the services sectors in many member states remain robust. For example, whereas the Eurozone manufacturing PMI for March came in at 47.5, down from a previous level of 49.3, the comparable services PMI figure was a still healthy 53.3 and up from 52.8 in the previous month. Economic data from the United States also suggest that the recent period of weakening may have been transitory in nature. March ISM manufacturing figures, for instance, increased to 55.3 from 54.2 in the previous month. Furthermore, the unemployment rate dropped to 3.6% in April from 3.8% previously. The lack of meaningful inflationary trends, given what at first glance appears to be an extremely strong labour market, remains an important conundrum that US monetary authorities are currently dealing with.

The major US banks reported solid earnings over the first quarter, with those banks having a relatively lower exposure to investment banking and trading related activities outperforming their peers. In response to investor concerns about an imminent slowdown in US economic growth, given the fact that the current US economic expansion is already one of the longest on records, bank management teams suggested they are still not seeing material signs of loan quality deterioration. In addition, management teams indicated that their corporate clients are still confident about the economic outlook and open to carry out strategic acquisitions. One caveat, which was similarly expressed by many of the management teams of the non-financial companies that have so far reported, is that their clients’ positive outlook for the remainder of the year is contingent upon an eventual favourable resolution to the trade discussions taking place between the US and China.

During April, subordinated bonds issued by banks and insurance companies, as well as bonds issued by companies in the automotive and construction materials sectors, performed particularly well.

The supply of new bonds stood at EUR 38 billion in April. This represented a decrease of about 19% compared to March, but an increase of almost 12% year on year. Non-financial sector companies issued EUR 13 billion in new bonds last month, while financial sector companies issued EUR 25 billion in new bonds. New bonds totalling EUR 184 billion were issued in the first four months of this year, about 13% more than the same period last year.

Portfolio developments per 2019-04-30

The portfolio delivered a return of 0.70%, representing an underperformance of 1 basis point compared to the index which generated a return of 0.71%. During the month the portfolio’s sensitivity to market trends varied between 95% and 100%. The portfolio therefore held a slight underweight, to neutral positioning in terms of market risk.

Our positioning in the telecommunications, industrial goods and automotive sectors performed relatively well in April. In contrast, our positioning in the banks, infrastructure and basic resources sectors contributed negatively. Our liquidity position (in the form of cash and government bonds) had a negative impact.

At individual company level, positive contributions came from the overweights in Ford, Terna, Commerzbank, Renault, Telefonica and La Poste. In contrast, the overweights in Bank of America, Argenta Spaarbank, CPI Property Group and Eurogrid, as well as the underweights in Volkswagen (excluded), Banco Santander and Generali, contributed negatively to the return.

In April, the Fund participated in new bond issues by Erste Bank, Adler Real Estate and Morgan Stanley.

During the month, the fund built up a position in bonds issued by Dutch-Belgian retailer Koninklijke Ahold Delhaize. The company is considered to be a leader within the retail industry in the areas of corporate governance and sustainable sourcing practices, particularly as its relates to the certification of raw materials. For example 80% of the palm oil used in its private label products has been certified. The comparable figure for sea food is 99%.

Outlook
The material tightening of spreads since the start of this year has led to a decrease in the number of interesting investment opportunities. We will, therefore, maintain our defensive positioning.

Performance per 2019-04-30 (rebased)

No chart data available

Performance per 2019-04-30

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  Fund Benchmark
1 month 0.7 % 0.7 %
3 months 2.8 % 2.8 %
This year 3.9 % 4.0 %
2018 -0.4 % -0.8 %
Since inception (on annual basis) i 3.5 % 3.1 %
Performance is shown after deduction of ongoing charges and including the reinvestment of dividend that has been paid out. The value of your investments may fluctuate. Past performance provides no guarantee for the future.

Dividends

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Distributing
No

Maturity profile (2019-04-30)

Fund
Benchmark
24.4 %
5-7 year
20.2 %
24.0 %
3-5 year
27.5 %
22.2 %
7-10 year
17.9 %
18.3 %
0-3 year
26.0 %
9.1 %
> 10 year
8.4 %
2.2 %
Cash
0.0 %
Total
100 %
100 %

Sector allocation (2019-04-30)

30.6 %
Banks
12.3 %
Consumer Goods & Services
11.9 %
Utilities
9.3 %
Industry
7.4 %
Telecom & Technology
6.9 %
Financial Services & Real estate
4.8 %
Insurance
4.5 %
Sovereign bonds
3.7 %
Health Care
3.6 %
Energy
2.4 %
Basic Materials
2.0 %
Other
0.6 %
Asset Backed Securities
Total
100 %
The cash position is included in ‘Other’.

Rating allocation (2019-04-30)

Fund
Benchmark
5.0 %
AAA
0.5 %
5.2 %
AA
10.8 %
39.3 %
A
39.5 %
41.3 %
BBB
49.2 %
4.3 %
BB
0.0 %
2.7 %
Not Rated
0.0 %
2.2 %
Cash
0.0 %
Total
100 %
100 %
The rating allocation of the Fund is based on the Bloomberg Composite method. The rating allocation of the benchmark is based on the rating allocation used by provider Markit iBoxx.

Top 10 holdings (2019-04-30)

3.3 %
0.500% Duitsland 2017-27
2.3 %
2.875% Equinor 2013-25
1.7 %
1.500% Enexis 2015-23
1.5 %
0.736% Bank of America frn 2017-22
1.5 %
3.875% Eurogrid 2010-20
1.2 %
2.000% Renault 2019-24
1.2 %
1.375% DS Smith 2017-24
1.1 %
1.375% Tesco 2018-23
1.1 %
1.125% Deutsche Bahn 2019-28
1.0 %
1.000% Cheung Kong Infra Fin 2017-24
Total
15.8 %

Ongoing charges

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Management fee i
0.32 %
Service fee i
0.15 %
Taxe d'abonnement i
0.05 %
Expected ongoing charges i
0.52 %

Other costs

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Upward swing factor i
0.20 %
Downward swing factor i
0.20 %
The swingfactor is applicable if the sum of in and outflow (end trading day) is more than a pre defined percentage ( the so called ‘threshold’) of the fund size. The level of the threshold 1%. As of 1 January 2018 the swing factor has been adjusted from 0.25%/0.25% to 0.20%/0.20%.

Share class details

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Share class
AN i
Investor type
Private
Distributing
No
Benchmark i
Markit iBoxx Euro Corporates Index
Duration hedged
No
Investment category
Credits
Universum
European credits
Inception date
2018-09-20
Domicile
Luxembourg
May be offered to all investors in
France, Luxembourg, The Netherlands
UCITS status i
Yes
Status
Open-end i
Base currency
EUR
Share class currency
EUR
Management company
Kempen Capital Management N.V.
Depositary and custodian
J.P. Morgan Bank Luxembourg S.A.

Tradability

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Minimum subscription
Initial subscription €1
Listed
no
Subscription/Redemption Frequency
Daily
ISIN i
LU0979490777

KCM Vision

Kempen Capital Management is an asset manager with a long-term investment approach. We strongly believe in engaged shareholdership that benefits all stakeholders. As a long-term responsible investor, we firmly believe that active ownership and shareholder engagement contribute to positive change across the board.

Our KCM wide approach to responsible investment

To put our vision into action we engage with our investment targets on a wide array of strategic, financial, environmental, social and governance (ESG) topics. Our long-term investment worldview paired with thorough analysis and an experienced and diverse ESG team allow us to use both voting and engagement as means to consistently encourage positive change. Through this process of constructive engagement, we are able to contribute to the development of principles and standards of corporate responsibility within companies that we invest in. Our full voting records are available here.

Our fund approach to Responsible Investment

The Kempen (Lux) Euro Sustainable Credit Fund has a more strict ESG process than other in-house credit funds. In addition to exclusion of companies that are on the general KCM exclusion list, it excludes companies that have violate the UN Global compact or the additional ethical guidelines, such as companies associated with nuclear energy, coal, alcohol, tobacco, adult entertainment and gambling. Furthermore, besides excluding companies associated with the production of controversial weapons, our definition includes any sort of military weapons.

An engagement approach is chosen for companies that are involved in GMO, factory farming, animal testing or if less than 5% of their revenue is derived from the production of fur or fur products.