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Allianz US High Yield - AM - HKD

ISIN: LU0648978533

Investment Objective:

The fund concentrates on high-yielding corporate bonds of companies that are domiciled in the U.S.A. Up to 20% of the fund's assets may be invested in securities that are denominated in currencies other than the US-dollar. The investment objective is long-term capital appreciation.

Fund manager:

Forsyth, Doug

Portfolio Highlights:

New buys were primary and secondary market purchases within the telecom, consumer staples, health care and industrials sectors. Sells included calls and an issuer that is expected to be acquired. The aforementioned E&P company was replaced with a more attractive investment opportunity.


The high-yield market has recovered well after a significant move lower in 2015 and early 2016. There are several unique factors that drove the market lower, but the astounding fact is that high-yield bonds cycled through what is normally seen in US economic recessions. Spreads moved significantly higher and defaults subsequently rose. However, the market has now rebounded and the default rate likely has seen its peak for this cycle. From a fundamental standpoint, as well as the observed condition of the economy, defaults should trend to near the long-term historical average into 2017. The current spread of approximately 490 basis points reflects a market that is still pricing in a higher-than-likely realized default rate. Stress in select industries of the market has waned, and overall, balance sheets, leverage ratios and interest coverage ratios continue to support an investment in the asset class. Furthermore, only about 15% of the market matures before 2019. This amount is far lower than the average annual new issuance over the past five years. Central-bank activities and conversations should lead to a clear path of ongoing accommodation. US mone-tary policy continues to be accommodative with the Fed expected to take a cautious approach toward ad-justments. The purpose of these adjustments would be to achieve a normalized rate environment, after an extended period of extreme accommodation. Outside of the US, global monetary policy continues to be overwhelmingly accommodative, with policymakers using aggressive stimulus measures in Europe and in regions throughout Asia. From a fundamental standpoint, a single quarter-point rate hike would not be meaningful for the operating activities of the vast majority of issuers. Until the Fed either moves aggressively or is well into the tightening cycle, monetary policy should not be expected to drive an extended sell-off and spread-widening in high yield. Notably, in the past 30 years, the US has not fallen into recession, nor have high-yield spreads moved substantially higher, without being preceded by an inverted yield curve. Despite some recent flattening, which is arguably the result of overseas influences, rather than domestic factors, the steepness of the curve between the 3-month Treasury bill and the 10-year Treasury note remains. History has also shown that when high-yield bond spreads widen beyond 700 basis points, the forward 12-month and 24-month returns of the asset class are overwhelming favorable. Taking it one step further, when spreads exceed 800 basis points, an investor has never lost money in 42 instances on a two-year horizon, according to a market study. Only in one instance out of 42 has an investor lost more than 1% over the next 12 months. To put this analysis in context, spreads reached 887 basis points on Feb. 11 of this year. Relative value within the rating categories can be viewed as the composite of all of the factors expected to affect the market. Since the sharp rebound in the overall market, B-rated issuers offer the most attractive balance between return and risk without sacrificing the benefits of interest-rate diversification. CCC-rated bonds are the least compelling of the three credit-quality buckets due to their elevated exposure to default risk and significant recovery. It is prudent to be highly selective when choosing to invest within this subcate-gory. From an asset-class perspective, the relative value proposition of US high-yield bonds is clear. With US Treasuries and US investment-grade corporates yielding less than 1.9% and 3%, respectively, and trillions worth of debt globally yielding less than 0%, the 6.6% yield of the US high-yield market is a compelling oppor-tunity for both international and domestic investors alike. Among fixed-income alternatives, high-yield bonds should return to their historical norm as a contributor from both a diversification and a relative-performance perspective. Interest rates will have a negligible im-pact on the high-yield market given the relative average spread and dollar market price today. The Fed path, earnings trends, commodity prices and global growth will all influence the outlook.


Fund price as of 01.12.16

Issue price: 8,27

Redemption price: 8,03

Type of fund: bond fund

Risk and Reward Indicator*: 4

Currency: HKD

Redemption price (previous day): 8,02

Deviation in %: 0,12

Interim profit: -

Equity gains EStG-investors in %: -

Equity gains KStG-investors in %: -

Annual high (13.10.16): 8,19

Annual low (16.02.16): 7,20

* For each fund a risk and reward indicator will be disclosed which will be calculated on the basis of the fund's volatility. The volatility describes how much the value of the fund went up and down in the past. Funds of categories 1 to 7 of the risk and reward profile have shown in the past a very low (category 1) up to a very high (category 7) volatility. The units of a fund of category 1 to 7 of the risk and reward profile might be subject to very low up to very high price fluctuations based on the historical volatilities observed.


Morningstar-Rating: ** (2)

Feri-Rating: E

Performance data in %

Date: 31.10.16

1 year: 5,83

3 years: 2,35

3 years annualised: 0,78

5 years: 20,89

5 years annualised: 3,87

10 years: -

10 years annualised: -

Since inception: 23,65

Since inception annualised: 4,16

Volatility in %

Date: 31.10.16

3 years: 6,45

5 years: 5,95

Basis of calculation for performance: Unit value (not including front-end loads); Distributions reinvested. Average annual performance is calculated by distributing the total performance of a period, taking into account the compound interest effect, evenly across each respective year.

Past performance is not a guide to future returns.

Source: IDS GmbH


+ Particular yield potential of high-yielding corporate bonds
+ Capital gains opportunities on declining market yields
+ Currency gains against investor currency possible in unhedged unit classes
+ Broad diversification across individual securities
+ Possible extra returns through single security analysis and active management


+ Bonds suffer price declines on rising interest rates
+ High-yielding corporate bonds entail above-average risk of volatility, illiquid markets and capital loss. The fund unit price may be subject to sharply increased volatility.
+ Currency losses against investor currency possible in unhedged unit classes
+ Limited participation in the potential of individual securities
+ No guarantee that single security analysis and active management will be successful