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EFG New Capital

New Capital USD Shield Fund

Date:

Marketing Communication

Executive Summary

Key events in market

The short-term US credit bond market delivered a positive performance in April: the Fund’s reference market (ICE BofA 1-3 Years US Corporate excluding 144A Index) returned +0.56% during the month, the 3-5y bucket +0.76%, while the 10+y bucket declined -1.32%.

Key performance & positioning updates

In April the Fund delivered a positive absolute return of +0.61%, +5bps versus the reference index. The Fund closed the month with an A rating, 4.73% yield, and modified duration at 1.86 years (vs 1.82 years of the reference index).

Market Update

April was a rollercoaster for financial markets, triggered by President Trump’s tariff announcements on what he dubbed Liberation Day on 2 April. The irony is that looking at the monthly performance of the MSCI All Country World Equity Index, which rose by 1% in April, one might conclude that it was a relatively quiet month. Instead, the tariff announcement on 2 April was followed by a decline of more than 11% that was only halted by the announcement of a 90-day pause on most US tariffs. Subsequently, further backtracking by Trump on tariffs on certain sectors, such as technology and automotives, and the impression that, at the end of negotiations, US tariffs will not be much higher than before Liberation Day have helped the global stock markets gradually recover.

However, the events of the past few weeks will have lasting consequences on markets and geopolitical balances. In particular, the role of the dollar as a global reserve currency is being seriously questioned due to the unpredictability of the US administration’s actions and the difficulty in understanding what its strategy is. The decline in the dollar’s trade-weighted exchange rate of more than 4% during the month, which brought the year-to-date decline to over 8%, is perhaps the start of a trend.

One consequence of the US dollar’s decline is that while the local currency performance of stock indices of major developed economies has been similar, the US market has significantly underperformed its peers when measured in the same unit of account. Furthermore, emerging markets outperformed developed ones, confirming a stylized historical fact that they benefit from the weakness of the US dollar.

Fund Performance & Positioning

In April the Fund delivered a positive absolute return of +0.61%, +5bps versus the reference index. The positive relative performance can be attributed to the overweight in the longest maturity bonds (3-5y), together with security selection in the 1-3y bucket. In terms of duration the Fund maintained a neutral stance (1.86y vs 1.82y for the reference market): we remain almost 0.71y underweight in the 1-3y bucket, which is more than compensated by overweights in the 0-1y (+0.04y) and 3-5y (+0.71y) buckets.

In terms of factor contribution, 44% derives from 3-year exposure, 12% from 5-year, 22% from 2-year and 10% from 1-year, while 10% comes from credit spread. From a sector perspective, the Fund maintained a higher exposure than the reference market to Financials (62% vs 48%). While we are significantly underweight in US exposure, we nevertheless believe that we are differentiated by our broad diversification in terms of countries and issuers. We do not hold any subordinated debt or US regional banks and we no longer hold short-dated US Treasuries (USTs). These have previously been used to maintain liquidity for new issues and and repositioning, with future . market opportunities influencing future allocations to USTs. In terms of countries, we are well diversified outside the US, with representation from 13 countries of 20 countries in the benchmark, plus a further three which are outside the reference index and supranational (3.3%). Our major exposures outside the US (34%) are in France (11%) and Canada (10%). Our major underweight is in US (-45%), mainly due to underweighting financials (-20%), utilities (-6%) and technology (-4%). In terms of credit ratings, we maintain an overweight on the higher quality rating buckets AAA/AA (+13% vs benchmark) and slightly underweight (-1.3%) within the A bucket (42% in the portfolio). We reduced the underweight in the BBB bucket from -12% to -11%, which now stands at 23%. We are invested in 99 positions (vs 1,581 of the reference index).

In terms of trading activities, we continue to participate in the primary market (buying DELL 2028 and JAPTOB 2028), in part as a result of inflows. We focused trades on the 2-3y bucket, selling very short-dated bonds (< 1 year) as required. All trades have been executed in line with our investment process, which is based on risk framework analysis. The Fund starts May with an A average rating (vs A- of the reference index), a yield of 4.73% and 1.86 years duration. We continue not to consider aggressive and volatile positioning such as high yields and/or subordinated bonds: we believe good opportunities are provided by the investment grade universe, allowing us to focus on delivering a cautious approach. Optimising risk-adjusted returns is our clear objective for investors in our short-term investment grade fund. The Fund is invested in USD denominated issuers, therefore there is no foreign exchange exposure, while no derivatives are used. In addition, the Fund is Article 8+ with green bond exposure at 5% vs 1% of the reference index.

Outlook

The Federal Reserve is set to leave the Fed funds rate unchanged at 4.25-4.50% at the next Federal Open Market Committee (FOMC) meeting on 8 May. This would represent a third straight meeting on hold following 100bp of cuts in the final three meetings of 2024, as hard data continues to hold up better than soft data. In the most recent projections by the Fed, the stagflation mix of sluggish growth and sticky inflation was highlighted by Powell as the main reason why the FOMC is in no hurry to cut.

The market expects between three and four rate cuts this year with the first one in summer. As a reference, before the so-called ‘Liberation Day’ the market had expected the Fed to cut 2-3 times in 2025. In terms of data, real GDP contracted by an annualized 0.3% in first quarter of 2025, its first decline since 2022. The drop was driven by a record 4.83% drag from net exports, as companies front-loaded imports ahead of US tariff hikes. Consumer spending also softened, growing just 1.8%. April employment grew by 177k jobs, while the unemployment rate was unchanged at 4.2%. However, this data did not reflect the decisions made after 2 April, and in particular do not yet reflect any impact from the tariffs themselves. Another solid monthly jobs report will give the FOMC a reason to keep policy rates on hold and hence data should be monitored closely. US President Trump continues to test the limits of markets and the economy. The 'Liberation Day' and the escalation of the trade war against China sent equity markets into a tailspin. We expect volatility to remain high amid elevated uncertainties about Trump’s willingness to soften announced tariffs. Persistent geopolitical uncertainty requires close monitoring. Looking at our market, in recent days credit spreads have tightened significantly due to trade concessions granted by Trump. We believe demand for short-duration remains elevated as investors are drawn to the all-in yield, particularly with the expected decline in yields on cash-oriented products. We expect stable credit spreads over the coming months, keeping carry elevated. In this context of geopolitical uncertainty, short term credit bonds are less affected by any expected volatility. We continue to follow our approach that aims to maximize diversification through a strong and repeatable investment process which is focused on risk. Our proprietary risk tool identifies idiosyncratic risks in the investment universe that we seek to avoid, while we target better diversification on the main risk factors. As such, we continue to avoid subordinated bonds, regional banks, low liquidity issuers/bonds and countries such as China.

While remaining aware that these elements are a potentially important missing factor in our diversification, we nevertheless prefer not to be exposed to them to be consistent with our investment process. Our process continuously screens the universe (including the primary market) with the aim of improving diversification and minimising risk. Our expertise in both quantitative and qualitative elements provide mutual challenge, with the aim of delivering the best risk-adjusted returns for our clients. In focusing on the short-term high-quality investment grade universe we aim to provide clients with a portfolio in which risk analysis is fully embedded. In so doing, we believe the Fund offers a way to de-risk an asset allocation by providing a strong, repeatable, and effective cautious approach.

Disclaimer

MARKETING COMMUNICATION

For professional clients, qualified investors and accredited investors only. The value of investments and the income derived from them can fall as well as rise, your capital is at risk. Note: Past performance is not a guide to the future. Returns may increase or decrease as a result of currency fluctuations.

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 produced by EFG Asset Management (UK) Limited for use by the EFG International  ("EFG Group" or "EFG") worldwide subsidiaries and affiliates within the EFG Group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389736. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111. 

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.

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. 

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.

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:  Ireland.  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 relevant memorandum and articles of association, prospectus, key information document, the addenda, the supplements 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 as follows:

Ireland: from the registered office of the Fund at 35 Shelbourne Road, Ballsbridge, Dublin, Ireland

United Kingdom:  from the UK facilities agent, EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AF, United Kingdom

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.

Italy: from the Italian paying agent, All funds Bank S.A.U., Milan Branch, Via Santa Margherita, 7 – 20121, Milan, Italy

Germany: from the German Facility Agent, FE fundinfo (Luxembourg) S.a.r.l. 6 Boulevard des Lumières, Belvaux 4369 Luxembourg

Austria, France, Luxembourg, the Netherlands, Portugal, Spain and Sweden: from the European Facility Service provider, FE fundinfo with registered address 6 Boulevard des Lumières, Belvaux, 4369 Luxembourg

Cyprus: from the Cypriot Paying Agent Eurobank Cyprus Ltd, 41 Makariou Avenue, 1065, Nicosia, Cyprus

Greece: from the Greek Paying Agent, Eurobank S.A., 8 Othonos Street, 10557 Athens, Greece

A summary of investor rights associated with an investment in the Fund shall be available in English from www.newcapital.com.

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.

Hong Kong: This document is issued by EFG Asset Management (Hong Kong) Limited and has not been reviewed by the Securities and Futures Commission (‘SFC”) in Hong Kong. The SFC takes no responsibility for the contents of this statement and makes no representation as to its accuracy or completeness. Registered address: 18th Floor, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong. The above information does not constitute an offer, solicitation or invitation, publicity or any other advice or recommendation. Informational sources are believed to be reliable and accurate at the time of issue but no representation or warranty, expressed or implied, is made as to the fairness, accuracy or completeness of the information. Investment involves risk. Past performance is not indicative of future results. Before making any investment decision to invest in the Fund, you should read the Hong Kong offering documents and especially the risk factors therein. 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. 

Singapore: This document shall be construed as part of the information memorandum (the "Information Memorandum") for the Fund, which shall be deemed to include and incorporate this document and any other document, correspondence, communication or material sent or provided to eligible participants in relation to the Fund from time to time. Accordingly, this document must not be relied upon or construed on its own without reference to and as part of the Information Memorandum.

The Fund has not been authorised or recognised by the Monetary Authority of Singapore (“MAS”), and the units in the Fund (the "Units") are not allowed to be offered to the retail public. Moreover, the Information Memorandum is not a prospectus as defined in the Securities and Futures Act 2001 of Singapore, as amended or modified from time to time (“SFA”), and statutory liability under the SFA in relation to the content of prospectuses would not apply. The Information Memorandum has not been and will not be registered as a prospectus with the MAS. Accordingly, the Information Memorandum, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the Units may not be circulated or distributed, nor may the Units be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to the public, any member of the public or any person in Singapore, other than under an exemption provided in the SFA for offers made (a) to an institutional investor (as defined in Section 4A of the SFA) pursuant to Section 304 of the SFA, (b) to a relevant person (as defined in Section 305(5) of the SFA), or any person pursuant to an offer referred to in Section 305(2) of the SFA, and in accordance with the conditions specified in Section 305 of the SFA, or (c) otherwise pursuant to, and in accordance with, the conditions of any other applicable provision of the SFA. The Units are classified as "capital markets products other than prescribed capital markets products" (as defined in the Securities and Futures (Capital Markets Products) Regulations 2018 and Specified Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

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 7389736 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 personnal 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.  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 UCITS Fund plc (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:
Park House
116 Park Street
London
W1K 6AP
UK

+44 (0)20 7491 9111
[email protected]

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