(LF) GLOBAL BOND FUND LU0730413092

The investment objective of the Sub-Fund is to invest its assets primarily in transferable debt securities (mainly Sovereign and investment grade corporate bonds, denominated in Euro, USD and other major currencies), issued in Europe and North America, admitted to an Official Listing or dealt in on a Regulated Market worldwide. Secondarily the Sub-Fund may invest up to 15% of its net assets in sovereign and investment grade corporate bonds in other world markets. Emerging markets currency exposures is limited to 15% of the Sub- Fund’s net assets. The Sub-Fund may invest up to 10% of its net assets in mortgage-backed securities and asset-backed securities. Additionally, the Sub- Fund invests in bank deposits, and money market instruments, of European banks and major corporates. The Sub-Fund can also invest in structured financial instruments, as well as in financial derivative instruments for the purposes of efficient portfolio management or hedging.

The first quarter of 2026 saw a sharp shift in fixed-income markets. A geopolitical energy shock pushed Brent crude past $115 per barrel, reigniting inflation—which reached 2.5% in the Euro area by March. To manage this, the European Central Bank held its deposit facility rate steady at 2.00%. This triggered a "bear flattening" of the yield curve, a condition where short-term rates rise faster than long-term rates. Consequently, the 2-year German Bund yield surged to 2.616%, while the 10-year yield rose to 3.004%, heavily compressing the spread. Despite broader market volatility, steady capital inflows persisted throughout the quarter. Performance, however, reflected the difficult environment. The portfolio concluded the period with a normalized return of -1.103%, underperforming the relevant market segment as depicted by the ICE BofA 3-5 Year Euro Broad Market Index , which returned -0.817%.

The portfolio navigated this environment through structural sector positioning and active adjustments to its government debt allocations. Structurally, an overweight position in Corporate Debt was maintained, peaking at around 57% before settling near 52%. This persistent tilt toward corporate bonds generated a vital carry premium, providing a helpful buffer against broader market depreciation. Conversely, the combined Government Debt exposure remained underweight throughout the period. However, the primary factor influencing the quarter's underperformance was the tactical adjustment of this specific allocation. Early in the quarter, the overall government exposure was tactically increased, reaching a peak of roughly 53% in early March. This maneuver extended the portfolio's overall modified duration—a metric defining price sensitivity to interest rate changes—to an absolute peak of 4.15 years. This extended duration was significantly overweight, exposing the portfolio to amplified capital losses when the yield curve unexpectedly shifted upward. In response to the rising rate environment, a defensive pivot occurred in late March. The combined government debt exposure was aggressively reduced to approximately 38.1% by quarter-end. This strategic reduction successfully lowered the portfolio’s modified duration to a more defensive 3.52 years, insulating the assets against further interest rate spikes.