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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:

The US-high-yield market ended the month of January higher. Overall credit-market strength and a quick drop in Treasury yields helped high-yield bonds weather a decline in both sentiment and the equity markets. Investors were confronted with economic data indicating slower growth and emerging-market headwinds. The Fed announced additional asset-purchase reductions for February, but continued to reinforce expectations for ongoing accommodative central-bank policies. The stronger-performing industries were Paper, Airlines and Healthcare. The weaker-performing industries were Super Retail, Apparel/Textiles and Environmental. Sixty new issues priced in the month, raising $33.2 billion in proceeds. No issuers defaulted in the month. The upgrade-to-downgrade ratio declined to 0.9, with 19 up to 22 down. The fund gained along with the market for the month, as the majority of issuers held in the strategy moved higher. The portfolio was held back slightly from an underweight in CCCs relative to its market segment. Industry exposure that helped included Technology, Telecom-Wireless and Healthcare. All of the aforementioned industries exhibited stronger issue-specific performance. Relative weightings did not have a material impact on relative returns. Industry exposure that lagged included Diversified Financial Services, Services and Automotive & Auto Parts. All three of the aforementioned industries had weaker issue-specific performance and were overweight, but the individual weighting differentials did not influence relative performance. Transactions were minimal in the period. One Rental issuer and one Entertainment issuer were added. One Energy issuer was called.


Outlook:

With the majority of macro headwinds resolved, high-yield investors can enter 2014 with a clear understanding of the opportunities and risks present in the market. The fundamentals have not changed materially from the previous quarter, which is positive. Credit statistics support investment in the asset class. Balance sheets are solid. Leverage ratios and interest coverage ratios are near, or better than, levels seen in the past 25 years. Corporate cash levels remain high, and acquisition activity is ongoing. The economic outlook is positive for the US. Economic statistics continue to surprise on the upside, and the recent Fed policy announcement was perceived to be constructive. Importantly, the level of asset purchases by the Fed can now be reduced based on its confidence in the economic trajectory. The Fed will cut purchases of Treasuries and mortgages by $10 billion beginning in January. The pace of future reductions of asset purchases will be data-dependent. However, investors should not fear an abrupt tightening because the Fed is unlikely to increase short-term rates for the foreseeable future. The Fed noted during the quarter that it will wait until well after the previously targeted 6.5% unemployment rate is breached, and further added that it will also wait for inflation to return to target levels. The high-yield market has priced in a default-rate forecast that is higher than the current rate. Among fixed-income alternatives, high-yield bonds will continue to be a contributor from both a diversification and a relative-performance perspective. Risks sighted by external strategists include the communication issues within the US government, geopolitical risks, emerging-markets overcapacity and the growth outlook for China. The budget-balancing activity caused the average investor to lose confidence in how Congress and the Executive branch manage financial affairs in the US. Nevertheless, the budget deal was a positive step toward curtailing a fiscal drag in the US for 2014. Nearly all strategists agree that the outlook for credit is constructive, with minimal defaults projected for both the remainder of 2014 and 2015. Therefore, coupon-like return is possible for the year. High-yield market strategists┬┐ expectations for total return are in the low to mid-single digits on average, largely based on rising interest rates.


Overview

Fund price as of 4/17/14

Issue price: 10.38

Redemption price: 10.08

Type of fund: bond fund

Risk and Reward Indicator*: 4

Currency: HKD

Redemption price (previous day): 10.08

Deviation in %: 0.00

Interim profit: -

Equity gains EStG-investors in %: -

Equity gains KStG-investors in %: -

Annual high (3/6/14): 10.20

Annual low (4/15/14): 10.08


* 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.


Ratings

Morningstar-Rating: -

Feri-Rating: -


Performance data in %

Date: 3/31/14

1 year: 5.56

3 years: -

3 years annualised: -

5 years: -

5 years annualised: -

10 years: -

10 years annualised: -

Since inception: 24.12

Since inception annualised: 8.59


Volatility in %

Date: 3/31/14

3 years: -

5 years: -


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


Opportunities:


+ 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


Risks:


+ High-yielding corporate bonds entail above-average risk of volatility and capital loss. The fund unit price may be subject to sharply increased volatility.
+ Bonds suffer price declines on rising interest rates
+ 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