EFG

New Capital is part of EFG Asset Management. For more information visit: www.efg.com

Date:

Marketing Communication

Executive Summary

Key events in market

The Short Term US Credit bond market delivered a positive performance in March: the Fund’s reference market (ICE BofA 1-3 Years US Corporate excluding 144A Index) delivered +0.40% during the month, the 3-5y bucket +0.38%, while the 10+y bucket -1.42%.

Key performance & positioning updates

In March the Fund delivered a positive absolute return of 0.39%, in line with the reference index. The Fund ends the month with A rating, 4.79% in terms of yield, modified duration at 1.85 years (vs 1.80 years of the reference index).




Market Update

March saw a reversal in market sentiment and the MSCI World All Countries Index fell 4.15% in the month, bringing its year-to-date performance to -1.7%. The losses were steepest in the US - the Nasdaq lost more than 7% in March - while European indices limited the losses and emerging countries posted a small gain.

Treasury yields fell in the US but rose in Europe where the 10-year German Bund approached 3%. The reduced yield spread between US and European government bonds and the prospect of a more expansionary fiscal policy in Europe boosted the euro which rose more than 4% against the US dollar. The US dollar fell against major currencies and its trade-weighted exchange rate gave up all the gains made after the US presidential election in November 2024.

The decline in equity markets reflects concerns about the impact of the tariffs threatened by the US and the likely retaliation by other countries. Fears of a global trade war add to the evidence that the US economy is slowing and there is a real risk that uncertainty about US economic policy will lead to a recession. The expectation of interest rate cuts by the Fed explains the decline in US bond yields.

In contrast, Germany plans to increase public spending on infrastructure and defence. The improved growth outlook prompted an upward revision of expectations on the European Central Bank's (ECB)'s monetary policy. Despite the strengthening of European currencies against the US dollar, the local stock markets have lost much less than the US.

Finally, in China it is worth noting the more constructive approach towards the stock markets by the administration, highlighted by the meeting between Xi Jinping and the heads of the main companies in the technology sector, including Jack Ma. Together with the announcements of further stimulus measures for the economy, this has contributed to the better performance of emerging stock markets compared to those of developed countries.

Fund Performance & Positioning

In March the Fund delivered a positive absolute return of +0.39%, in line with the reference index. In terms of relative performance, the asset allocation within the curve was slightly negative, while the security selection contributed positively.

On duration the Fund maintained a neutral stance (1.85y vs 1.80y of the reference market): we still hold almost 0.72y underweight in the bucket 1-3y which is more than compensated by overweight in the 0-1y (+0.05y) and 3-5y (+0.72y). Looking at factor contribution we have 45% given by 3 years exposure, 13% from 5 years, 24% from 2 years and 11% from 1 year. 7% comes from credit spread.

From a sector point of view, the Fund maintained a higher exposure than the reference market in the financial sector (61% vs 49%). What continues to differentiates us is the broader diversification in terms of countries and issuers given that we’re underweight 18% on US names. We don’t have any subordinated debt or US regional banks and we don’t hold any short-dated USTs (US Treasuries) anymore. This exposure has been used for USTs high liquidity in case of new issues on the primary market, repositioning and good yields provided. Market opportunity will drive us in holding USTs looking ahead.

In terms of countries, we are well diversified outside US. We are totally exposed to thirteen countries belonging to the benchmark (out of 20 countries), and other three which are outside the reference index and supranational (3.3%). Our major exposure outside US (39%) is in Canada (11%) and France (9.5%). Our major underweight is in US (-40%), mainly due to underweighting financials (-18%) and utilities (-5%) and Technology (-4%).

Looking at ratings, we continue to keep an overweight on the higher quality rating buckets AAA/AA (+16% vs benchmark), slightly underweight (-3.7%) on A bucket (40% in the portfolio). We reduced the underweight in the BBB bucket from -14% to -12%, now at 22%. We are invested in 100 positions (vs 1’550 of the reference index).

In terms of trading activities, we continue to join the primary market following some inflows: SUMITR ‘28, CBAAU’28, NWG ’28, LGENSO ’28, UOBSP ’28, and DELL ’28. We focused the trading on the 2-3y bucket selling very short bonds (< 1 year) when needed. All trades have been completed following our specific investment process, is based on risk framework analysis.

The Fund starts the new month with an A average rating (vs A- of the reference index), 4.79% in terms of yield and 1.85 years in terms of duration.

We continue to avoid considering aggressive and volatile positioning such as high yields and/or subordinated bonds: good opportunities are provided by the Investment Grade universe, allowing us tp focus in delivering a cautious approach. In our view, better risk adjusted returns are the clear outcome for clients who invests in this short term investment grade product.

The Fund has all USD denominated issuers, so no Forex exposure. No derivatives have been used. In addition, it is useful to remember the Fund is an Article 8+ with green bonds at 6% vs 1% of the reference index.

Outlook

In its last meeting, the Fed kept the federal funds rate at 4.25-4.50%, in line with market expectations. It announced that it would slow the quantitative tightening pace reducing the maximum cap on treasury runoff to $5bn (from $25bn), while leaving the cap on mortgage backed securities at $35bn. The updated projections show lower growth, higher unemployment and higher inflation than in Dec 2024. The stagflationary mix of sluggish growth and sticky inflation was highlighted by Powell as the main reason why the FOMC is in no hurry to cut soon. Even so, comments by the Fed Chair suggesting that the FOMC would consider any tariff-induced inflation spike as transitory, and that (long-term) inflation expectations are well-anchored. This confirms that the Fed is more concerned on the growth shock from tariffs. The median dot was unchanged and showed 50bp of cuts in 2025, 50bp in 2026 and 25bp in 2027. Long-term fed funds were still at 3%. At the time of writing, the market expects the next rate cut not before June 2025 (66% of probability) and 3 rate cuts by the end of the year. On the market high uncertainty remains ahead of 2 April when the Trump administration is set to announce reciprocal and sectorial tariffs, after announcing 25% tariffs on auto imports. This is having an impact on confidence and would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures. What the EU is willing to offer will depend on the scale of US tariffs, and the US’ willingness to negotiate over the coming weeks and months. So, the story still needs to be watched closely: such policies can reshape global growth dynamics (Canada, Mexico et al). In the meanwhile, no agreement of ceasefire between Russia and Ukraine took place. In the last day of the month Trump even said that he would consider “secondary tariffs” on Russian oil if a ceasefire with Ukraine can’t be reached. Persistent geopolitical uncertainty remains, to be monitored closely.

Looking at our market, credit spreads have tightened further even though the supply has been high. The demand remains elevated as investors are drawn to the high all-in yield, particularly with the expected decline in yields on monetary products. We expect stable credit spreads over the coming months, keeping carry elevated. We will focusing on auto and credit card sectors. Autos because of the tariffs, the transition to electric vehicles and sluggish demand from China. On the other side, the credit card loans defaults have hit the highest level since the wake of the 2008 financial crisis, a sign that lower-income consumers’ financial health is waning after years of high inflation. On the portfolio we continue combining high quality floating and fixed securities to hedge against changes in central bank perceptions. We follow our approach that aims to maximize diversification through a strong and repeatable investment process, focused on risk. Our proprietary risk tool picks up a series of small idiosyncratic risks in the investment universe that we wish to avoid, while ensuring we are better diversified on the primary risk factors. We continue to avoid subordinated bonds, regional banks, low liquidity issuers/bonds and countries such as China. Whilst aware these elements are an important missing factor in our diversification, we prefer to avoid exposure to be consistent with our Investment process.

Our process continuously screens the universe (including primary market) to add diversification/minimise risk. Both quantitative and qualitative expertise challenge each other, to deliver the best risk adjusted returns. By focusing on short-term, high-quality IG universe, the Fund totally embeds risk analysis. Additionally, we believe the Fund provides a way to de-risk asset allocation by providing a strong, repeatable and 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.
 
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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.

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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:
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W1K 6AP
UK

+44 (0)20 7491 9111
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