Lupus alpha Sustainable Convertible Bonds R

Performance (gross in EUR)[1]:

Key Statistics [3]:

Regional Allocation (delta adjusted) as of 31/03/2021

Sector allocation as of 31/03/2021

Sector allocation (delta adjusted) as of 31/03/2021

Regional Allocation as of 31/03/2021

Top ten holdings (delta adjusted) as of 31/03/2021

• Selection of convertible bonds according to principles of sustainable investing (ESG)
• Equity-like returns with lower fluctuations in value
• The average expected volatility is approximately half of that experienced in the wider equity market
• Similarity to bonds ('bond floor') helps to mitigate losses in the event of declining equity markets
• Shorter duration and interest rate sensitivity than corporate bonds
• Access to issuers from the universe of small and mid-cap companies that often do not issue straight corporate bonds

Our Convertible Bonds team can draw on many years of successful management of global convertible bonds:

• More than 27 years joint experience managing convertible bond funds
• Excellent market access to specialised brokers and companies issuing convertible bonds
• Proprietary databases and analysis models
• Methodically sound, experienced risk management

Global convertible bonds as a building block of asset allocation

The team primarily invests in global convertible bonds with a balanced equity sensitivity (delta of 30%-70%). The fundamental analysis and thorough security selection are at the core of the investment process. In addition to the assessment of equity and credit risk of each convertible bond, extensive structural analysis is very important. The aim is to select the convertible bonds with the best risk-return profile depending on the economic situation. Currency risks are systematically hedged. 

The first step involves filtering the investment universe consisting of approximately 1,000 bonds. Investible securities are determined using a series of quantitative filters, particularly liquidity and credit quality. The resulting universe consists of around 250 to 300 bonds. In a next step the ESG screening takes place. Securities, that do not meet our sustainability criteria, are excluded from the investment universe. Furthermore, we focus on companies that deliver a positive contribution to sustainable development goals. 

This is followed by a comprehensive bottom-up analysis of each convertible bond, which is the primary focus of the investment process. In addition to the analysis of the equity component, the credit quality and structural features are evaluated and market technicals are assessed. The portfolio is then constructed, with position sizes based on their effects on the overall portfolio.   All positions are subject to ongoing disciplined risk monitoring with regard to valuation, credit quality, equity sensitivity (delta) and other key risk figures. 

The objective of the fund management is to achieve high capital appreciation by investing in convertible bonds selected according to sustainability principles.

The FNG seal is the quality standard for sustainable investment funds in German-speaking countries. It was launched in 2015 after a three-year development process involving key stakeholders. The associated sustainability certification must be renewed annually.

The FNG seal goes far beyond the pure portfolio view and is holistic and meaningful. With more than 80 questions, the sustainability investment style, the associated investment process, the associated ESG research capacities and a possible accompanying engagement process are analysed and evaluated. In addition, elements such as reporting, the fund company as such, measurable sustainability indicators, an external sustainability advisory board and good corporate governance issues play an important role.

Detailed information on the FNG seal can be found at https://www.fng-siegel.org. Information on the sustainable investment policy and its implementation of the Lupus alpha Sustainable Convertible Bonds can be found at: https://www.lupusalpha.de/institutionelle-investoren/produkte/fonds/lupus-alpha-sustainable-convertible-bonds/.

The Austrian Ecolabel denotes a better quality of life and environmental quality, clear and transparent information, great significance, companies and organisations taking responsibility for environmental policy, and high-level collaboration with optimal levels of service. 

Products must satisfy a number of criteria to be certified with the Ecolabel.

These products undergo a comprehensive assessment before they can be certified. The assessment covers the environmental impact of the product or service and reviews the production process, waste management, quality levels and usability.  

For more details on the Austrian Ecolabel, visit www.umweltzeichen.at. For information about the sustainable investment policy and implementation of Lupus alpha Sustainable Convertible Bonds, visit: https://www.lupusalpha.de/institutionelle-investoren/produkte/fonds/lupus-alpha-sustainable-convertible-bonds/. 

The European SRI Transparency logo signifies that the Lupus alpha commits to provide accurate, adequate and timely information to enable stakeholders, in particular consumers, to understand the Socially Responsible Investment (SRI) policies and practices relating to the fund.

Detailed information about the European SRI Transparency Guidelines can be found on www.eurosif.org, and information of the SRI policies and practices of the Lupus alpha Sustainable Convertible Bonds can be found at https://www.lupusalpha.com/institutional-investors/products/fonds/lupus-alpha-sustainable-convertible-bonds/.

The Transparency Guidelines are managed by Eurosif, an independent organisation.  

The European SRI Transparency Logo reflects the fund manager’s commitment as detailed above and should not be taken as an endorsement of any particular company, organisation or individual.

Chances

• Access to global convertible bonds and hence to a variety of different sources of return.
• Convertible bonds offer the opportunity to participate in the upside potential of equities while providing the safety of a bond due to the asymmetric risk/return profile.
• Active management allows investors to exploit opportunities and ensures stringent risk management.

Risks

• Risk of price changes: Experience shows that equities are subject to sharp price fluctuations and thus the risk of price declines. These fluctuations are particularly impacted by the earnings development of the issuing company as well as sector trends and overall economic development.
• Counterparty default risk: If counterparties and issuers do not fulfil or only partially fulfil their contractual payment obligations, this can result in losses for the fund. Even when securities are carefully selected, losses caused by the financial collapse of issuers cannot be ruled out.
• Liquidity risk: If securities are traded in a relatively narrow market segment, it can be difficult to resell them in situations where there is insufficient liquidity. If counterparties do not fulfil or only partially fulfil their contractual payment obligations, this can result in losses for the fund. Even when securities are carefully selected, losses caused by the financial collapse of issuers cannot be ruled out.
• Interest-rate risk: Changes in market interest rates can affect the prices of fixed-income securities. These fluctuations vary, however, depending on the term of the fixed-income securities.
• Risks connected with derivatives transactions, particularly options: Changes in the price of the underlying asset can devalue an option. Options have leverage effects that impact the fund more strongly than the underlying asset. When selling options, there is the risk that the fund will suffer an indefinite loss amount.
• Operational risks: The fund can become the victim of fraud, criminal acts or errors by company employees or external third parties. Finally, management of the fund can be negatively impacted by external events such as fires, natural disasters or similar.