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 Sub-Fund has a medium risk profile and is addressed to investors who seek to achieve regular income and capital gains through investing mainly in Global bonds.

The second quarter was defined by a pronounced geopolitical energy shock following the closure of the Strait of Hormuz, which forced a repricing of interest-rate expectations. The disruption constrained global energy supplies, driving Brent crude from 64.59 dollars per barrel in January to a peak average of 106.29 dollars in May, before diplomacy allowed prices to recede to 85 dollars by late June. This energy shock halted the European disinflationary trend and reignited price pressures, pushing Eurozone headline inflation to a peak of 3.2% in early June. In response, the European Central Bank moved away from its holding pattern on 11 June, raising key rates by 25 basis points to preserve price-stability credibility. The acceleration in inflation and the tightening triggered a bear flattening of the yield curve: German Bund yields rose in May, with the 2-year reaching 2.758% and the 10-year climbing to 3.193%, before cooling energy prices and the June hike allowed them to settle lower into quarter-end.

The portfolio adapted to the volatile rate environment through structural sector positioning and active management of its modified duration. The overweight position in corporate debt progressively increased to 57.43% by July, providing a carry premium that buffered against capital depreciation. Cash allocations were actively deployed, dropping to 0.66%, while government debt remained structurally underweight to minimise exposure to the curve segments most vulnerable to ECB tightening. Duration management played a central role. As inflation signalled upward pressure in early May, a defensive pivot lowered the portfolio's modified duration to a quarterly trough of 3.48 years, insulating the assets just as Bund yields peaked. Anticipating that the June hike would mark the end of the ECB's tightening cycle, duration was then extended to a peak of 3.79 years later in the month. When this extension proved slightly misaligned with market stabilisation, a final adjustment recalibrated modified duration down to 3.73 years by early July to protect the risk profile against further volatility