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EFG New Capital

New Capital Fund Lux - EUR Shield

Date:

Marketing Communication | Quarterly Commentary

Market Update

The first quarter of 2025 experienced significant market volatility. January 2025 began positively with the MSCI All Country World Index rising 3.4% due to optimism around Trump's proposed policies and strong corporate earnings. However, bond and currency markets faced turbulence, notably in Japan due to its contrasting monetary policy. In February 2025, global stock prices corrected, driven by concerns about Trump's policies potentially impacting US economic growth. Despite this downturn, the bond market rallied, and gold reached a new all-time high. Positive developments included a potential Ukraine ceasefire, German election results, and increased support for the Chinese stock market. March 2025 brought a reversal in market sentiment, with the MSCI All Country World Index falling 3.9%. US markets saw steeper losses, while European indices curbed theirs. Market concerns were fuelled by potential impacts of US-imposed tariffs, fears of a global trade war, and signs of a slowing US economy. Meanwhile, European bond yields rose, and the euro strengthened due to the prospect of a more expansionary fiscal policy in Europe.

Fund Performance & Positioning

In Q1 2025, the Fund achieved a positive absolute return of +0.7%. A more detailed analysis reveals that the slight underperformance relative to the benchmark can be attributed to overexposure to the longest maturities (-7bps) and the selection in the financial sector. The absence of subordinated bonds, which is part of our cautious approach, cost the Fund 8bps. As of the end of the quarter, our exposure spans 17 countries, whereas the reference index is diversified across 42 countries. The United States (+4.2%), Canada (+6.2%), and Spain (+3.6%) are our most significant overweights, while the Netherlands (-8.6%) and France (-3.9%) are the largest underweights. Notably, the Fund has never had exposure to China, Hong Kong, and other minor countries present in the benchmark, such as the Eastern EU countries. As for the duration profile, the fund maintained a neutral stance throughout the period (1.85 years vs 1.83 years of the reference market). This was achieved by underweighting the 1-3y bucket on the one side (-0.65year) and overweighting both the 0-1y (+0.04y) and 3-5y (+0.56y) buckets on the other. It is worth noting that this positioning was slightly reduced throughout the quarter. From a sector perspective, the Fund ended the quarter with an overweight to a well-diversified group of senior financials (67% vs 50%) and consumer cyclicals (12% vs 9%). Conversely, it is slightly underweight several sectors such as industrials (-7%), consumer non-cyclicals (-5%), energy and utilities (-3%), basic materials and communications by 2%. In terms of ratings, we maintain an overweight in the AA (+10% approximately) and A (+8% approximately) buckets, while consistently underweighting the BBB bucket in the range of 18%-19%. During the quarter, we participated in the primary market (or switched positions) to enhance diversification, increase yield, and improve our ESG score. We focused on the 2-3y bucket to reduce the underweight. We started Q2 with an average A rating (vs A- of the reference index), a yield of 2.97%, and a duration of 1.85 years. We continue to avoid riskier segments of the market such as high yields and/or subordinated bonds, especially so as we manage to identify opportunities within the investment grade universe. This allows us to maintain a cautious approach and deliver better risk-adjusted returns for our investor base. Since inception, the Fund is exclusively invested in euro-denominated issuers, thus avoiding forex exposure. We do not use derivatives and it is also worth noting the Fund qualifies as an Article 8+ As of end Q1, green bonds constituted 26% of our portfolio, compared to 14% of the reference index.

Outlook

The current outlook for European fixed income is somewhat uncertain, given fears over tariffs, modest growth, and a complex geopolitical landscape.

Significant uncertainty persists in the market, particularly in anticipation of 2 April when the Trump administration is expected to announce reciprocal and sectorial tariffs, following the announcement of 25% tariffs on auto imports. In response, the EU is preparing a robust counterstrategy. European Commission President Ursula von der Leyen has emphasized that while the EU's preference is for a negotiated solution, it is prepared to retaliate with a "strong plan" if necessary. This plan includes a variety of potential measures, such as deploying the EU's anti-coercion instrument, which could result in substantial restrictions on trade and services, intellectual property rights, foreign direct investment and access to public procurement for US entities. Consequently, depending on the impact of the tariffs, euro area growth forecasts may be revised downward in the coming quarters. Meanwhile, no ceasefire agreement has been reached between Russia and Ukraine. President Trump recently suggested that he would consider imposing "secondary tariffs" on Russian oil if a ceasefire with Ukraine cannot be achieved. Concerning individual European countries, Germany's parliament has approved incoming Chancellor Merz's plan to lift the country's debt brake for defense spending and to enact a $545bn infrastructure deal. In response, the European Commission has announced the ReArm EU defence investment plan, theoretically worth €800 billion. This plan aims to address the defense and security needs of the European Union with greater strategic autonomy and to provide a short-term response to the crisis in Ukraine. As a result, defence spending in Europe is set to increase. Additionally, on the last day of the quarter, Marine Le Pen, leader of France’s National Rally, was found guilty of misappropriating EU funds and subsequently banned from running for public office for five years. While Le Pen plans to appeal the verdict, political uncertainty in France will persist and remain a concern into Q2 2025. Despite the complexity of the current environment, we believe high-quality, diversified short-term corporate bonds remain attractive. However, the importance of security selection has increased.

Activity in the primary market has remained relatively strong in the investment grade space, with investors receptive to new issues. This reinforces our commitment to active engagement in the primary market to identify new opportunities, while maintaining selectivity. We are closely monitoring developments in the automobile sector, where tariffs, the transition to electric vehicles, and sluggish demand from China are posing significant challenges. Regarding strategy, the Fund will maintain its cautious and diversified approach, continuing to avoid areas of higher structural risks such as high yields and subordinated bonds. While we acknowledge that this could lead to missing some further tightening of spreads on riskier assets, our priority is to avoid any additional volatility. Our process continuously scans the universe (including the primary market) to add diversification and minimize risk. Both quantitative and qualitative expertise are leveraged to deliver the best risk-adjusted return for our clients. By focusing on the short-term, high-quality investment grade universe, we aim to provide a valuable instrument for clients which fully encompasses risk analysis. Furthermore, the Fund consistently offers a means to de-risk each asset allocation, providing a robust, repeatable and cautious approach.

Disclaimer

MARKETING COMMUNICATION

This document has been produced by EFG Asset Management (Switzerland) SA is authorised and regulated by the Swiss Financial Market Authority. Registered address: EFG Asset Management (Switzerland) SA , Quai du Seujet 24, 1201 Geneva, Switzerland. Telephone +41 22 918 71 71. 

All sources: EFG Asset Management (UK) Limited ("EFGAM"), Factset, Bloomberg, Morningstar as at end of the month.  Any other sources as applicable.  

This document has been prepared solely for information purposes. The information contained herein constitutes a marketing communication and should not be construed as financial research or analysis, an offer, a public offer, an investment advice, a recommendation or solicitation to buy, sell or subscribe to financial instruments and/or to the provision of a financial service. It is not intended to be a final representation of the terms and conditions of any investment, security, other financial instrument or other product or service. The content of this document is intended only for persons who understand and are capable of assuming all risks involved. Further, this document is not intended to provide any financial, legal, accounting or tax advice and should not be relied upon in this regard. The information in this document does not take into account the specific investment objectives, financial situation or particular needs of the recipient. You should seek your own professional advice (including tax advice) suitable to your particular circumstances prior to making any investment or if you are in doubt as to the information in this document. 

Performance results shown are net of applicable fees and expenses. The value of investments and the income derived from them can fall as well as rise, and you may not get back the amount originally invested. Past performance is no indicator of future performance. Investment products may be subject to investment risks, involving but not limited to, currency exchange and market risks, fluctuations in value, liquidity risk and, where applicable, possible loss of principal invested. Some funds may have high volatility owing to portfolio composition or the portfolio management techniques utilised or be subject to various other risk factors. Such risks are set out in the Prospectus and KIID/KID.

The information provided in this document is not the result of financial research conducted by EFGAM’s research department. Therefore, it does not constitute investment or independent research as defined in EU regulation (such as “MIFID II” or “MIFIR”) nor under the Swiss “Directive on the Independence of Financial Research” issued by the Swiss Banking Association or any other equivalent local rules. Investors should carefully read the Prospectus and the Key Investor Information Document (KIID) and review such documents prior to taking any investment decisions.  This information can be obtained on request and free of charge from your client relationship officer.

A copy of the English version of the prospectus of the Fund and the key investor information document relating to the Fund is available on www.newcapital.com and may also be obtained from EFG Asset Management (UK) Limited. Where required under national rules, the key investor information document/the key information document will also be available in the local language of the relevant EEA Member State. 

Waystone Management Company (IE) Limited is the appointed Management Company and is regulated by the CBI. The Manager is a private limited company incorporated in Ireland under the company registration
number C123529 with its registered office at 4th Floor, 35 Shelbourne Road, Ballsbridge, Dublin, D04 A4E0, Ireland.

Although information in this document has been obtained from sources believed to be reliable, no member of the EFG group represents or warrants its accuracy, and such information may be incomplete or condensed. Any opinions in this document are subject to change without notice. This document may contain personal opinions which do not necessarily reflect the position of any member of the EFG group. To the fullest extent permissible by law, no member of the EFG group shall be responsible for the consequences of any errors or omissions herein, or reliance upon any opinion or statement contained herein, and each member of the EFG group expressly disclaims any liability, including (without limitation) liability for incidental or consequential damages, arising from the same or resulting from any action or inaction on the part of the recipient in reliance on this document. 

EFG and its employees may engage in securities transactions, on a proprietary basis or otherwise and hold long or short positions with regard to the instruments identified herein; such transactions or positions may be inconsistent with the views expressed in this document.  
The availability of this document in any jurisdiction or country may be contrary to local law or regulation and persons who come into possession of this document should inform themselves of and observe any restrictions. This document may not be reproduced, disclosed or distributed (in whole or in part) to any other person without prior written permission from an authorised member of the EFG Group.

Financial intermediaries/independent asset managers who may be receiving this document confirm that they will need to make their own independent decisions and in addition shall ensure that, where provided to end clients/investors with the permission from the EFG Group, the content is in line with their own clients’ circumstances with regard to any investment, legal, regulatory, tax or other considerations. No liability is accepted by the EFG Group for any damages, losses or costs (whether direct, indirect or consequential) that may arise from any use of this document by the financial intermediaries/independent asset managers, their clients or any third parties.

Comparisons to indexes or benchmarks in this material are being provided for illustrative purposes only and have limitations because indexes and benchmarks have material characteristics that may differ from the particular investment strategies that are being pursued by EFG and securities in which it invests. 

The information and views expressed herein at the time of writing are subject to change at any time without notice and there is no obligation to update or remove outdated information.
Risks associated with debt instruments with loss-absorption features – the Fund/Note/Account may invest in debt instruments with loss-absorption features, for example, contingent convertible debt securities (“CoCos”), senior non-preferred debts and subordinated debts issued by financial institutions. These debt instruments are subject to greater risks when compared to traditional debt instruments as such instruments typically include terms and conditions which may result in them being partly or wholly written off, written down, or converted to ordinary shares of the issuer upon the occurrence of a pre-defined trigger event (e.g. when the issuer is near or at the point of non-viability or when the issuer’s capital ratio falls to a specified level). Such trigger events are likely to be outside of the issuer’s control and are complex and difficult to predict and can result in a significant or total reduction in the value of such instruments.
Country of origin of the collective investment scheme: Luxembourg. The information contained in this document is merely a brief summary of key aspects of the fund. More complete information on the fund can be found in the prospectus or key information document, and the most recent audited annual report and the most recent semi-annual report. These documents constitute the sole binding basis for the purchase of fund units. Copies of these documents are available free of charge and may be obtained upon request from www.newcapital.com and also at the registered office of the Fund at 19, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg, R.C.S. Luxembourg N° B 74 740; in the United Kingdom from the UK facilities agent, EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AF, United Kingdom; in Italy from the Italian paying agent, Allfunds Bank S.A.U., Milan Branch, Via Santa Margherita, 7 – 20121, Milan, Italy; and in Switzerland from the Swiss representative, CACEIS (Switzerland) SA, Route de Signy 35, CH-1260 Nyon 2 and the paying agent, EFG Bank SA, 24 Quai du Seujet, CH-1211, Geneva 2, Switzerland. 

USA: EFG Asset Management (North America) Corp. ("EFGAM NA") is a US Securities and Exchange Commission (SEC) Registered Investment Adviser For more information on EFGAM NA Corp, its business, affiliations, fees, disciplinary events, and possible conflicts of interests please visit the SEC Investment Advisor Public Disclosure website (https://adviserinfo.sec.gov/) and review its Form ADV.  EFG Asset Management (Americas) Corp. (“EFGAM Americas”) is a registered SEC investment adviser providing investment advisory services. Please refer to EFGAM Americas’ ADV Part 2 and/or Form CRS for additional information and risks. EFGAM Americas Registered address: 701 Brickell Avenue, Suite 1350 – Miami, FL 33131. The content of this document has not been reviewed, endorsed or approved by any regulatory authority in the United States of America.

Switzerland: EFG Asset Management (Switzerland) SA is authorised and regulated by the Swiss Financial Market Authority. Registered address: EFG Asset Management (Switzerland) SA , Quai du Seujet 24, 1201 Geneva, Switzerland. Telephone +41 22 918 71 71. The fund has been approved  by the Swiss Financial Market Supervisory Authority ("FINMA") for offer to qualified investors ("Qualified Investors") and  non qualified investors (the "Non Qualified Investors"), who are investors who do not meet the criteria to be treated as qualified Investors investors (the "Qualified Investors") within the meaning of Art. 10 para. 3 of the Swiss Federal Act on Collective Investment Schemes (“CISA”) as of 1 January 2020 and “Professional Clients” as defined in Article 4 para 3-5 or Article 5 para 1 and 4 of the Swiss Financial Services Act (“FINSA”) as of 1 January 2020.  The legal documents as well as the annual report and the semi-annual report, as far as applicable, of Fund can be obtained free of charge from the representative in Switzerland, your Client Relationship Officer or by sending an email to [email protected].

Hong Kong: EFG Asset Management (Hong Kong) Limited is regulated by The Securities & Futures Commission (CE number AQU400).  Registered address: EFG Asset Management (Hong Kong) Limited , 18th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong. The contents of this document have not been reviewed nor endorsed by any regulatory authority in Hong Kong. Hong Kong residents are advised to exercise caution in relation to this offer. An investment in the Fund may not be suitable for everyone. If you are in any doubt about the contents of this document, you should consult your stockbroker, bank manager, solicitor, accountant or other financial adviser for independent professional advice. This document has not been approved by the SFC in Hong Kong, nor has a copy of it been registered with the Registrar of Companies in Hong Kong and, must not, therefore, be issued, or possessed for the purpose of issue, to persons in Hong Kong other than (1) professional investors within the meaning of the SFO (including professional investors as defined by the Securities and Futures (Professional Investors) Rules); or (2) in circumstances which do not constitute an offer to the public for the purposes of the Companies Ordinance (Cap 32, Laws of Hong Kong) or the SFO. This document is distributed on a confidential basis and may not be reproduced in any form or transmitted to any person other than the person to whom it is addressed.

Singapore: EFG Asset Management (Singapore) Pte Ltd is a capital markets services license holder regulated by the Monetary Authority of Singapore (License number CMS 100196-2).  Registered address: EFG Asset Management (Singapore) Pte Ltd, 79 Robinson Road, #18-04, Singapore 068897. 
  
United Kingdom: EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 07389736. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111

Information for investors in Australia:
For Professional, Institutional and Wholesale Investors Only. This document has been prepared and issued by EFG Asset Management (UK) Limited, a private limited company with registered number 07389736 and with its registered office address at Park House, Park Street, London W1K 6AP (telephone number +44 (0)20 7491 9111). EFG Asset Management (UK) Limited is regulated and authorized by the Financial Conduct Authority No. 536771.
EFG Asset Management (UK) Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the United Kingdom (FCA Registration No. 536771) under the laws of the United Kingdom which differ from Australian laws. This document is personal and intended solely for the use of the person to whom it is given or sent and may not be reproduced, in whole or in part, to any other person.
ASIC Class Order CO 03/1099 EFG Asset Management (UK) Limited notifies you that it is relying on the Australian Securities & Investments Commission (ASIC) Class Order CO 03/1099 (Class Order) exemption (as extended in operation by ASIC Corporations (Repeal and Transitional Instrument 2016/396) for UK Financial Conduct Authority (FCA) regulated firms which exempts it from the requirement to hold an Australian financial services licence (AFSL) under the Corporations Act 2001 (Cth) (Corporations Act) in respect of the financial services we provide to you. UK Regulatory Requirements The financial services that we provide to you are regulated by the FCA under the laws and regulatory requirements of the United Kingdom which are different to Australia. Consequently any offer or other documentation that you receive from us in the course of us providing financial services to you will be prepared in accordance with those laws and regulatory requirements. The UK regulatory requirements refer to legislation, rules enacted pursuant to the legislation and any other relevant policies or documents issued by the FCA.

Termination of marketing arrangements: Waystone Management Company (IE) Limited have the right to terminate the arrangements made for marketing the Fund
in certain jurisdictions and to certain investors. In such circumstances, Shareholders in the affected EEA Member State will be notified of this decision and will be provided with the opportunity to redeem their shareholding in the Fund free of any charges or deductions for at least 30 working days from the date of such notification.
European Union: Waystone Investment Management (IE) Limited is the European investment distributor and is authorized in Ireland as an investment firm under the
Markets in Financial Instruments Directive. Waystone Investment Management (IE) Limited acts as a distributor in the European Union under reference number C1011 and Ireland. Waystone Investment Management (IE) Limited does not provide investment advice on an independent basis.

Your Status as a Wholesale Client
In order that we may provide financial services to you, and for us to comply with the Class Order, you must be a 'wholesale client' within the meaning given by section 761G of the Corporations Act. Accordingly,
by accepting any documentation from us prior to the commencement of or in the course of us providing financial services to you, you: warrant to us that you are a ‘wholesale client’; agree to provide such information or evidence that we may request from time to time to confirm your status as a wholesale client; agree that we may cease providing financial services to you if you are no longer a wholesale client or do not provide us with information or evidence satisfactory to us to confirm your status as a wholesale client; and agree to notify us in writing within 5 business days if you cease to be a 'wholesale client' for the purposes of the financial services that we provide to you.

IMPORTANT NOTE: FOR PUBLICATIONS WITH CONTENT RELATED TO FUNDS
Offering Documents
Neither this document nor any document under which Interests in the New Capital Fund Lux (the “Fund”) are offered is a prospectus, product disclosure statement or other formal disclosure document under the Corporations Act.  Interests in the Fund may not be offered, issued, sold or distributed in Australia other than by way of or pursuant to an offer or invitation that does not need disclosure to investors either under Part 7.9 or Part 6D.2 of the Corporations Act, whether by reason of the investor being a wholesale client (as defined in section 761G of the Corporations Act and applicable regulations) or otherwise. Nothing in this document nor any document under which interests in the Fund are offered constitutes an offer of interests in a financial product or financial product advice to a 'retail client' (as defined in section 761G of the Corporations Act and applicable regulations).
The issuer of the interests in the Fund relies on exemptions available under Australian law from the need to hold an AFSL for the provision of financial services to Australian wholesale clients. Note that as all investors must be wholesale clients, no cooling off rights are available in relation to an investment in the Fund.
Contact us:
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UK

+44 (0)20 7491 9111
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