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Pioneer Investments - Consultant Update

Latest thought pieces and news from Pioneer

Taking the Credit for Investment Opportunities

Despite being in an environment where fixed income yields and spreads have compressed dramatically, we believe there are still pockets of opportunity within the credit universe. However, investors should consider changing their approach to bonds in order to meet performance expectations and look beyond the traditional investment pool to more flexible solutions such as Multi-Sector Credit.

Click here to read more »

US Economy Pushes on as Trump Approaches First 100 Days

Pioneer Investments’ Head of Investment Management, US, Ken Taubes, offers his thoughts on the health of the US economy and the economic impact of Donald Trump’s first 100 days as US president. He believes a more positive economic outlook and rising inflation could lead to more hawkish policies from the Federal Reserve, while the potential for corporate tax cuts and cash repatriation under the Trump administration has provided a tail wind for risk assets.

Click here to read more »

UK: Snap Election to 'Speed Up' Brexit

In Pioneer Investments’ latest Macro Report on the UK economy, the Global Asset Allocation Research team highlight that after a few months of strong growth economic momentum is starting to wane, especially in light of a rising inflation environment. They also consider whether the outcome of the snap election will be critical in framing the stance of both the UK and the EU during Brexit negotiations.

Click here to read more »

A View from the 20th Floor

Pioneer Investments’ Multi Strategy team offer their latest perspective on the global economy and how these themes are influencing their portfolio strategy. This month, the team discuss whether markets have gotten a little ahead of themselves, especially where President Trump’s proposed policies are concerned.

Click here to read more »

French Presidential Election – Preliminary Thoughts

The presidential election in France is surely the most prominent event for Spring and a potential victory for Marine Le Pen and the Front National would be perceived as a key geopolitical risk for the Eurozone as a whole. Following the first round, our Asset Allocation Research team attribute a low probability for a Le Pen win and expect that a firmer growth path for the Eurozone should help in facing multiple geopolitical challenges, unless other tail risks materialize.

Click here to read more »

Pioneer Investments Performance Update

Click on the below links for the latest performance information and commentaries



Irish Institutional Business Contacts:

Jonathan May
Head of Institutional Business – UK & Ireland
Tel: +020.7190.2080
Email: jonathan.may@pioneerinvestments.com

Alan O'Dowd
Head of Consultant Relations – UK & Ireland
Tel: +353.1.480.2142
Email: alan.o'dowd@pioneerinvestments.com

Michael Curran
Client Director
Tel: +353 (0)1 480 2107
Email: michael.curran@pioneerinvestments.com



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Taking the Credit for Investment Opportunities

Fixed income investors are in a quandary. While, fixed income investments have delivered stellar returns for multiple decades, we are now in an environment where yields and spreads have been compressed dramatically. So is there any value to be found and how do investors go about finding this?

Pockets of Opportunity
Pioneer Investments’ Director of Credit Research, US, Michael Temple believes that there are still pockets of opportunity within the credit universe, but investors need to change their approach to bonds in order to meet performance expectations. This means looking beyond the traditional investment pool or using different tools, such as borrowing from the alternative universe, to provide the lower correlations that have historically been a natural attribute of fixed income.

Insurance-Linked Securities (ILS)
One such strategy is Insurance-Linked Securities (ILS). These are investments whose performance depends upon the occurrence of low-frequency, high-severity natural disasters - such as hurricanes and earthquakes. ILS provides a way for reinsurance companies to transfer a portion of their risk and premiums to the capital markets and in return ILS investors benefit from a periodic coupon payment related to the insurance premiums and principal repayment at the end of the investment term, assuming the triggering events do not occur.

One of the most appealing aspects of ILS is its potential diversification properties. By definition, performance is driven by random meteorological or geophysical events, rather than being determined by economic factors such as GDP growth, interest rates or corporate profitability. This key distinguishing feature has resulted in very low correlation to other asset classes historically. Moreover, from a risk-return perspective, ILS can offer higher coupon payments relative to comparably rated corporate bonds. As such, investors may expect relatively high annual returns potentially, although given the randomness and severity of natural disasters, investors should also expect some years of sizeable losses and therefore we believe it is important to maintain a long-term horizon when committing to this asset class.

Floating Rate Securities
Floating rate securities are another area of interest for our Credit team, especially now that the Federal Reserve is tightening monetary policy. Floating rates securities are debt instruments, typically bank loans, with coupon payments that fluctuate, or ‘float’, based on short-term reference rates, such as 90-day US LIBOR. These bank loans are arranged by commercial or investment banks on behalf of corporate borrowers and the companies that issue bank loans are typically rated below investment grade. In terms of credit rating, they are similar to high yield bonds and typically offer a higher yield than investment grade rated bonds. However, a key difference is that bank loans are typically senior to high yield bonds in an issuer’s capital structure and are secured by specific company assets which can result in lower credit risk.

An important reason for investing in bank loans is their floating rate coupon. This presents a unique opportunity to invest in an income generating investment with low price volatility. The coupon of a floating rate loan typically adjusts on a quarterly basis to a predetermined spread over LIBOR (usually 90-day LIBOR). This short reset feature allows the bank loan coupon to quickly adjust in line with any interest rate movements. This quick reset feature also means that bank loans are a very short duration instrument, which can allow them to help diversify a core fixed income portfolio. Additionally, it is always helpful to bear in mind that the income generated by bank loans will increase if short-term interest rates rise and vice-versa.

These are just two examples of the yield enhancing potential and diversification* benefits of opportunities within credit and there are other esoteric areas within this universe – such as emerging markets credit, high yield and currencies - also have the potential to add value in the current environment.

So yes, there are strategies and sectors that have the potential to enhance a portfolio during these difficult times, but the challenge for pension fund investors is how to access them and how to manage allocations to these, sometimes complex, strategies on a long-term time frame.

Multi-Sector Credit Solution
At Pioneer Investments, we believe a Multi-Sector Credit approach can provide a solution to this quandary. These strategies can provide to access a wide range of opportunities within the credit universe with the ability to dynamically move between different sectors, asset classes, countries and currencies and seek to provide better risk-adjusted potential returns at different points in the credit cycle.

Moreover, the strategic decision to follow a multi-sector approach could allow a scheme to access the tactical opportunities across a broad range of fixed income assets without having to appoint specific managers for each sub-asset class. Trustees maintain control with their decision to use a multi-sector credit manager, but delegate the strategic decisions of which sub-asset classes to pursue and when to investment managers with proven skill and experience in this field.

Value-Centric Approach
Pioneer Investments’ value-centric investment approach focuses on mispriced sectors and securities, relative value and downside protection. Its active asset allocation and security selection process assesses and shifts investments towards credit sectors that exhibit the potential for strong risk-adjusted returns. Added to that, the lower correlations produced by a broad range of credit investments have the potential to provide better diversification than those accessed via a typical high yield strategy.

The experienced, stable investment team focuses on three important elements:

  • An integrated approach that interweaves top-down (macro) views with bottom-up security selection.
  • The flexibility to exploit mispriced sectors and securities across a broad range of asset classes.
  • A multi-layer risk management framework emphasising the oversight of drawdown risk.

Pioneer Investments offers two Multi-Sector Credit strategies, both managed by our Boston-based fixed income team who aim to transform market challenges into investment opportunities. Our Credit Opportunities strategy takes an actively managed, flexible and diversified approach to multiple credit pools, seeking to achieve competitive risk-adjusted returns over a market cycle. While our Dynamic Credit strategy employs a similar flexible, opportunistic approach to multi-sector credit, but also seeks to avoid large drawdowns by incorporating an integrated hedging approach. Both strategies are underpinned by a disciplined multi-dimensional Risk Management Framework that integrates security selection and asset allocation.

* Diversification does not guarantee a profit or protect against a loss.

To find out more information, please click on the link below:

Click here for Dynamic Credit profile »

Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 10 April 2017.



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Pioneer Investments Performance Update


Absolute Return Multi-Strategy (targets cash +3.5%-4.5% pa*)

Our Absolute Return Multi-Strategy capability was launched in 2008. The strategy employs an unconstrained, flexible approach that seeks to capture alternative sources of return by actively investing in multiple directional and non-directional strategies. It strives to achieve effective diversification through investing in multiple, uncorrelated return streams, while seeking to reduce capital losses via disciplined drawdown management.

Gross Performance in EUR* 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)**
Pioneer Funds – Absolute Return Multi-Strategy 1.09 5.39 3.42 4.44 4.86
EONIA -0.09 -0.35 -0.15 -0.04 0.25
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Absolute Return Multi-Strategy, Class I, gross of fees, EUR in EUR terms, ^class launch: 12/12/2008. *Pioneer Investments' Absolute Return Multi-Strategy targets EONIA +3.5-4.5% pa. The target return can be exceeded or undershot and should not be construed as an assurance or guarantee. Target is gross of fees, taxes or duties that may be applicable, and assumes the reinvestment of dividends.
  • The Portfolio posted a positive return for the quarter
  • The Portfolio is managed on a “Four Pillar” investment approach. The Macro Strategy pillar delivered the lion’s share of performance in Q1. The US, EUR and EM Macro Equity strategies all delivered robust returns, several of the Thematic Equity strategies, including Robotics and Internet of Things performed strongly, as the IT and Industrials sectors gained ground. The “Oil Producers” basket of EM Currencies, led by the Russian Ruble, Brazilian Real and Colombian Peso grained ground against the basket of “Low Inflation” EM Currencies, including the Taiwan Dollar, the Korean Won and the Chilean Peso, however, the long U.S. Dollar position cost some performance, as the Trade-Weighted U.S. Dollar gave up 1.8% during Q1.
  • The Satellite Spread and Selection strategies delivered solid performances, as Financial Hybrids, non-Financial Hybrids and High Yield all rallied.
  • On the downside, the Satellite FX strategies underperformed, predominantly due to a strengthening of the South African Rand against the Turkish Lira and within the Satellite Equity strategies component, the relative value EU Banking Union strategy lost ground.
  • Finally, the Macro Hedging strategy gave up some ground, as volatility tapered off in equity and bond markets during Q1. The team views the Macro Hedging pillar as an “insurance policy” for which we pay a premium in the expectation that it will help to protect the portfolio during periods of market turbulence.



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Multi-Strategy Growth (targets cash +5.0%-6.0% pa*)

Our Multi-Strategy Growth capability was launched in 2008. The strategy employs the same unconstrained, flexible multi-strategy approach as that of its sister strategy, the Absolute Return Multi-Strategy, while targeting enhanced returns above cash rates, with less than half the volatility of global equities

Gross Performance in EUR* 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)**
Pioneer Funds – Multi-Strategy Growth 1.71 8.92 5.82 6.97 5.52
EONIA -0.09 -0.35 -0.15 -0.04 0.25
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Multi-Strategy Growth, Class I, gross of fees, EUR in EUR terms, ^class launch: 08/07/2008. *Pioneer Investments' Multi-Strategy Growth strategy targets EONIA +5.0-6.0% pa. The target return can be exceeded or undershot and should not be construed as an assurance or guarantee. Target is gross of fees, taxes or duties that may be applicable, and assumes the reinvestment of dividends.
  • The Portfolio posted a positive return for the quarter
  • The Portfolio is managed on a “Four Pillar” investment approach. The Macro Strategy pillar delivered the lion’s share of performance in Q1. The US, EUR and EM Macro Equity strategies all delivered robust returns, several of the Thematic Equity strategies, including Robotics and Internet of Things performed strongly, as the IT and Industrials sectors gained ground. The “Oil Producers” basket of EM Currencies, led by the Russian Ruble, Brazilian Real and Colombian Peso grained ground against the basket of “Low Inflation” EM Currencies, including the Taiwan Dollar, the Korean Won and the Chilean Peso, however, the long U.S. Dollar position cost some performance, as the Trade-Weighted U.S. Dollar gave up 1.8% during Q1.
  • The Satellite Spread and Selection strategies delivered solid performances, as Financial Hybrids, non-Financial Hybrids and High Yield all rallied.
  • On the downside, the Satellite FX strategies underperformed, predominantly due to a strengthening of the South African Rand against the Turkish Lira and within the Satellite Equity strategies component, the relative value EU Banking Union strategy lost ground.
  • Finally, the Macro Hedging strategy gave up some ground, as volatility tapered off in equity and bond markets during Q1. The team views the Macro Hedging pillar as an “insurance policy” for which we pay a premium in the expectation that it will help to protect the portfolio during periods of market turbulence.



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Credit Opportunities

Our Credit Opportunities strategy was launched in 2008 and employs a flexible multi-sector credit approach with full discretion to invest across the credit universe. The strategy typically invests in high yield, investment grade, emerging markets, asset backed securities, catastrophe bonds, bank loans and convertibles. The portfolio managers seek to invest where they see best value at any stage in the credit cycle and adjust weightings accordingly.

Gross Performance in GBP 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)^
Pioneer Institutional Solutions – Credit Opportunities 1.97 10.22 4.01 6.46 7.51
Benchmark 1.88 9.48 4.09 5.44 6.95
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Institutional Solutions – Credit Opportunities, Class X, gross of fees, GBP. ^Fund inception: 30/04/2008. The fund benchmark is 50% BoFA ML HY Master 2, 50% BoFA ML U.S. Corporate Master
  • The Portfolio performed positively during the quarter and outperformed its benchmark.
  • Given the global growth prospects, near term global political uncertainty and its possible economic impact, the team have continued to maintain portfolio positioning in terms of in Asset Type, Sector and Quality Distributions relative to the blended index.
  • In terms of Asset Type Distribution, allocations to the more compelling areas within the opportunity set helped drive performance for the quarter. Exposure to segments of the credit market that were identified as exhibiting attractive compensation for the associated risk were particularly beneficial. At the end of the period, the portfolio’s largest exposures were in high yield and high grade corporates while the remainder was in leveraged loans.
  • The portfolio's sector positioning focused on sectors that the team believes are largely domestic, fee or subscription based in nature or have favorable regulatory trends. At quarter-end, the largest exposures were in high yield communications, consumer non-cyclicals and energy. Within investment grade, the energy area of industrials were the largest exposure.
  • At quarter-end, the portfolio’s largest exposure was to BB, B and BBB rated instruments, representing approximately a 78% portfolio weight relative to the blended benchmark of a 68%. Further, relative to the blended benchmark weighting for ‘A to AAA’ rated instruments of approximately 22%, the portfolio ended the quarter at 16%. Finally, exposure to the lower quality segments of the credit market (CCC), the blended benchmark had 8.9% weight to CCC, where the portfolio weight was 2.0%.



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Dynamic Credit

Pioneer Funds - Dynamic Credit is a flexible and diversified multi-sector credit-orientated portfolio designed to adjust asset allocations in order take advantage of opportunities across credit markets based on valuations, volatility, dislocations and market timing. The strategy also employs an adaptive hedging strategy, which aims to buffer volatility and provide a measure of protection from extreme market dislocations.


Gross Performance in USD 3 months
(%)
1 year
(%)
3 years
(%pa)
Inception
(%pa)^
Pioneer Funds – Dynamic Credit 2.42 11.06 2.95 3.77
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Dynamic Credit, Class I, gross of fees, USD. ^Fund inception: 03/09/2013. There is no benchmark for this fund
  • The portfolio delivered a strong performance during the quarter
  • Performance for the quarter was driven by the portfolio’s credit exposure, both within High Yield and Investment Grade corporate securities.
  • Within High Yield, the sectors that performed well included Financials, Telecommunications and Healthcare, and within Investment Grade the Financials and Energy positions contributed positively.
  • The portfolio’s ability to generate attractive levels of income was driven by asset allocation and security selection decisions.
  • During the quarter, the overall asset allocation was maintained, but the team did make some opportunistic adjustments to the overall positioning of the portfolio. The team is still constructive overall on credit although much of this expected performance came during the first quarter.
  • The team continues to maintain flexibility in the portfolio’s positioning in order to navigate future fixed income markets with success. As a result, the U.S. Treasury-related duration has been increased, while a slight underweight to the neutral point of risk is maintained.
  • From a sector positioning standpoint, exposures to more volatile Energy names were marginally reduced in favour of positions within the industry that are generally less sensitive to changes in commodity prices. The Financials sector is favoured, which has the potential for improved profitability should interest rates increase and/or regulatory requirements decrease. The team continue to add exposure to their best ideas, highest alpha generating sectors and issuers.
  • Given the relative strength within credit markets the portfolio’s option positions, which are utilised for the purposes of hedging, were the largest detractor to performance.



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Absolute Return Bond (targets cash +2%-4% pa*)

Our Absolute Return Bond portfolios are managed by our investment grade fixed income team in Dublin. They use a range of alpha sleeves with the aim of delivering performance in excess of the cash benchmark. Each alpha sleeve is managed by a specialist portfolio manager within the team who has an absolute return target for their alpha sleeve each calendar year. The portfolios have no inherent market beta and each alpha trade on the funds has a drawdown limit and profit target. The commentary refers to the Pioneer Funds - Absolute Return Bond.

Gross Performance in EUR* 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since Strategy Change
(%pa)^
Pioneer Funds – Absolute Return Bond -1.70 -1.62 -1.75 -0.35 0.65
EONIA -0.09 -0.35 -0.15 -0.04 0.15
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Absolute Return Bond, Class H, gross of fees, EUR in EUR terms. * Pioneer Investments' Euro Absolute Return Bond strategy targets EONIA +2-4%. The target return can be exceeded or undershot and should not be construed as an assurance or guarantee. The target is gross of fees, taxes or duties that may be applicable, and assumes the reinvestment of dividends. ^investment strategy changed on 10 December 2010
  • The portfolio delivered negative returns during the quarter.
  • The Inflation sleeve was the strongest contributor over the period, thanks to a trade positioned for higher European real yields, as the team felt that the low negative level of real yields should move higher.
  • Within the Interest Rate Scandi component, the team felt that the 10-year Swedish yield had reached historic lows in early September 2016, on the basis that the Swedish central bank ("Riksbank") would announce a further tapering of bond purchases soon and implemented a position that would seek to benefit if yields moved higher. This position worked well over the quarter.
  • The Interest Rates $ Bloc was a negative contributor, with two positions in this sleeve being responsible for the majority of this underperformance. The team’s view that a combination of strong growth, higher global inflation and market momentum should impact bonds in New Zealand was countered by the global bond rally. This also hurt a similar position in Canada.
  • The Sovereign Spreads sleeve also detracted from performance. In early January the team expected that Italian sovereign bond yields would outperform German sovereign bond yields and positioned accordingly. Unfortunately, concerns about the French Presidential election meant that investors flocked to safer havens, such as German bonds. This position was closed in late January.
  • Two positions within the Interest Rates Asia alpha sleeve hurt performance. A Chinese trade under-performed when authorities unexpectedly increased short-term interest rates. Meanwhile an Indian position lost ground when the Reserve Bank of India decided not to cut rates and moved from an accommodative monetary stance to a neutral stance.
  • In terms of overall duration profile, the Portfolio ended the quarter with a duration of -3.78 years.



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Euro Aggregate

Gross Performance in EUR 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)^
Pioneer Funds – Euro Aggregate Bond -1.36 -0.80 2.99 4.55 5.76
Barcap Euro Aggregate Index -0.93 -0.56 3.64 4.64 4.75
Source: Pioneer Investments, 31/03/17 Performance refers to Pioneer Funds – Euro Aggregate Bond, Class I, gross of fees in EUR, ^fund inception: 13/02/2008
  • The Portfolio performed negatively this quarter and underperformed the benchmark.
  • The Credit Selection Euro sleeve performed strongly, benefitting from the team’s positioning on Investment Grade (IG) credit which has benefitted from a preference for more attractively valued subordinated debt, both in financials and non-financials. At the same time, the portfolio’s underweight exposure to the Corporate Sector Purchase Programme (CSPP) eligible universe worked well, as the team feel little value is offered here.
  • The Inflation sleeve was another strong contributor, thanks to a trade positioned for higher European real yields, as the team felt that the low negative level of real yields should move higher.
  • Within the Interest Rate Scandi component, the team felt that the 10-year Swedish yield had reached historic lows in early September 2016, on the basis that the Swedish central bank (“Riksbank”) would announce a further tapering of bond purchases soon and implemented a position that would seek to benefit if yields moved higher. This position worked well over the quarter.
  • The Interest Rates $ Bloc was a negative contributor, with two positions in this sleeve being responsible for the majority of this underperformance. The team’s view that a combination of strong growth, higher global inflation and market momentum should impact bonds in New Zealand was countered by the global bond rally. This also hurt a similar position in Canada.
  • The Sovereign Spreads sleeve also detracted from performance. In early January the team expected that Italian sovereign bond yields would outperform German sovereign bond yields and positioned accordingly. Unfortunately, concerns about the French Presidential election meant that investors flocked to safer havens, such as German bonds. This position was closed in late January.
  • Within the Event Driven Protectionism sleeve, the team has been concerned that President Trump’s policies in relation to trade tariffs, barriers and border taxes would have a negative impact on global trade. To protect against this, they implemented a number of trades that should profit from an increase in global trade tensions. The inability of Trump to enact any legislation, so far, has led to these positions under-performing.
  • In terms of overall duration profile, the portfolio ended the quarter with a duration of 4.69 years, versus the benchmark’s duration of 6.48 years



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Euro Corporate

Gross Performance in EUR 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since Inception
(%pa)^
Pioneer Funds – Euro Corporate Bond -0.08 3.11 3.36 5.24 5.50
95% ML EMU Corp Bond Index, 5% JPM 1 Month Euro Cash Index 0.25 2.41 3.23 4.23 4.61
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Euro Corporate Bond, Class I, gross of fees in EUR, ^fund inception: 05/10/2001
  • The portfolio posted mildly negative returns this quarter and underperformed its benchmark.
  • The Credit Selection Euro component contributed positively for the quarter. The portfolio’s Financials exposure was the strongest contributor for the quarter, with particular reference to subordinated holdings in the banking and insurance space. Financials also outperformed non-Financials as a consequence of the “reflation” trade that the market seemed to have favoured in Q1 as well as a continuation of the underperformance of CSPP-eligible bonds compared to non-eligible bonds.
  • The portfolio’s Real Estate exposure continued its positive performance, resulting in it being the second strongest sector this quarter, and the sector overweight remains one of the strongest in the Portfolio, as fundamentals remain attractive, especially for German names.
  • The overall performance for the Credit Spread Duration Macro component was negative for the quarter, with the European position detracting from performance less than the U.S. position. We enter the second quarter of 2017 with no positions in this space and are monitoring the market to seize opportunities as they come about.
  • In aggregate, the team’s non-credit strategies detracted from performance. The best performing strategy was Inflation where a trade that is positioned for higher European real yields was responsible for most of the performance during the quarter, as as the team felt that the low negative level of real yields should move higher. The Interest Rate Scandi strategy also recorded a positive contribution to performance this quarter.
  • The Interest Rates $ Block component was the biggest detractor, with two positions in this sleeve being responsible for the majority of underperformance during the quarter. The team’s view that a combination of strong growth, higher global inflation and market momentum should impact bonds in New Zealand was countered by the global bond rally. This also hurt a similar position in Canada. The Sovereign Spreads strategy also produced a negative performance in the first quarter of the year
  • In terms of overall duration profile, the portfolio ended the quarter with a duration position of 3.2 years, below the benchmark’s duration of 5.02 years.



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Euro Government

Gross Performance in EUR 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since Inception
(%pa)^
Pioneer Funds – Euro Bond -2.01 -2.14 3.44 5.18 5.37
JPM EMU Govt Bond Index -1.48 -1.74 4.09 5.25 4.92
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Euro Bond, Class I, gross of fees in EUR, ^unit class inception: 17/01/2001
  • The Portfolio performed negatively this quarter and underperformed its benchmark.
  • The Inflation sleeve was the strongest contributor over the period, thanks to a trade positioned for higher European real yields, as the team felt that the low negative level of real yields should move higher.
  • Within the Interest Rate Scandi component, the team felt that the 10-year Swedish yield had reached historic lows in early September 2016, on the basis that the Swedish central bank (“Riskbank”) would announce a further tapering of bond purchases soon and implemented a position that would seek to benefit if yields moved higher. This position worked well over the quarter.
  • The Interest Rates $ Bloc was a negative contributor, with two positions in this sleeve being responsible for the majority of this underperformance. The team’s view that a combination of strong growth, higher global inflation and market momentum should impact bonds in New Zealand was countered by the global bond rally. This also hurt a similar position in Canada.
  • The Sovereign Spreads sleeve also detracted from performance. In early January the team expected that Italian sovereign bond yields would outperform German sovereign bond yields and positioned accordingly. Unfortunately, concerns about the French Presidential election meant that investors flocked to safer havens, such as German bonds. This position was closed in late January.
  • Within the Event Driven Protectionism sleeve, the team has been concerned that President Trump’s policies in relation to trade tariffs, barriers and border taxes would have a negative impact on global trade. To protect against this, they implemented a number of trades that should profit from an increase in global trade tensions. The inability of Trump to enact any legislation, so far, has led to these positions under-performing.
  • In terms of overall duration profile, the portfolio ended the quarter with a duration of 5.48 years, versus the benchmark’s duration of 7.32 years.



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Euro High Yield

Gross Performance in EUR 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)^
Pioneer Funds – Euro High Yield 1.45 9.61 5.12 8.14 8.60
BA/ML Euro HY Constrained Index 1.68 8.99 4.55 7.93 7.72
Source: Pioneer Investments, 31/03/17. Performance refers to Pioneer Funds – Euro High Yield, Class E, gross of fees in EUR, ^fund inception: 05/12/2005. Class E is reserved for Italian investors only.
  • The portfolio generated positive returns over the quarter, but slightly underperformed the benchmark
  • The portfolio’s positioning in Banking Capital Goods and Insurance was a contributor during the period. Positioning in Telecom, Food Wholesale, Building and Construction detracted, whilst the overall defensive positioning was flat.
  • The portfolio’s positioning within the Banking sector had a positive impact on performance thanks to an underweight exposure to the Italian Banking sector. The spread overweight added to performance, as did off-benchmark positions in AT-1’s and subordinated issues of high quality, solid and well capitalised banks. Security selection was also positive for performance within Banking.
  • The portfolio’s off-benchmark exposure to leveraged loans added to relative performance - a c.5% exposure to the sector aims to diversify the Portfolio, enjoy stable returns and exploit the relatively attractive yield and volatility profile of the instruments.
  • Political uncertainty is playing a major role both in the U.S. and Europe, and the team believes it is important to maintain a well-diversified portfolio and to focus on active management, quality of assets and downside risk mitigation, which is crucial in the current market. In this context, a rigorous risk management approach is followed, whilst maintaining flexibility via a longer cash balance.
  • The portfolio is defensively positioned, holds an underweight position in Cyclicals and continues to hold an underweight in BBs. An overweight position in Emerging Markets has been maintained.
  • The portfolio currently has a short duration position of 2.8 years, versus its duration of 3.3 years. The credit spread duration at quarter-end was 3.1 years versus 3.3 years for the benchmark.



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Pioneer Global Investments Limited
1 George's Quay Plaza
George's Quay
Dublin 2
Telephone +353 (0)1 480 2000
Fax +353 (0)1 449 5000

Visit our Irish Institutional website at:
http://worldwide.pioneerinvestments.com/dubinst.jhtml
 

Important Information

Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31 March 2017. References to individual securities should not be taken as investment recommendations to buy or sell any security.

Pioneer Institutional Solutions – Credit Opportunities is a sub-fund of Pioneer Institutional Solutions a specialized investment fund created under the form of a fonds commun de placement with several separate sub-funds created in compliance with the provisions of the law of July 19, 1991 on undertakings for collective investment the securities of which are not intended to be placed with the public and is now subject to the law of 13 February 2007 concerning specialized investment funds. Pioneer Funds – Euro Bond, Pioneer Funds – Euro Corporate Bond, Pioneer Funds – Euro Aggregate Bond, Pioneer Funds – Euro High Yield, Pioneer Funds – Absolute Return Bond, Pioneer Funds – Absolute Return Multi-Strategy, Pioneer Funds – Multi-Strategy Growth, Pioneer Funds – Dynamic Credit (the “Sub-Funds”) are sub-funds of Pioneer Funds (the “Funds”) a fonds commun de placement established under the laws of the Grand Duchy of Luxembourg. Units of the Sub-Funds have been notified to the Central Bank of Ireland for distribution to the public in Ireland. Class I of the Sub-Fund is reserved to institutional investors and is subject to an initial subscription of EUR 10 million or more (or the equivalent in another currency).
On the 04 January 2016, Pioneer Funds - Absolute Return Multi-Strategy Growth was renamed Pioneer Funds - Multi-Strategy Growth. Until the 4 January 2016, the Sub-Fund had different characteristics.

The investment schemes, investment funds or strategies described in this document (the “Schemes”) may not be registered for sale with the relevant authorities of individual Member States of the EEA or in Switzerland. Where unregistered, the Schemes may not be sold or offered except in the circumstances permitted by law and therefore no action may be taken, directly or indirectly, which could be construed as a promotion or solicitation of the Schemes (including the provision of any Scheme documentation or advertising materials to any third party). The shares/units of any Scheme may not be offered for sale in the United States of America, or in any of its territories or possessions subject to its jurisdiction or to/for the benefit of a Restricted U.S. Person (as defined in the prospectus of the Funds).

No offer of any interest in any product will be made in any jurisdiction in which the offer, solicitation or sale is not authorised, or to any person to whom it is unlawful to make such an offer solicitation or sale.

Past performance does not guarantee and is not indicative of future results. There can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested.

Unless otherwise stated, all views expressed are those of Pioneer Investments. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected.

Please seek professional advice before you invest. This document does not constitute investment advice or any offering of shares/units and does not take account of the investment objectives or needs of or suitability for a specific investor. For additional information on the Fund, a free prospectus and key investor information document should be requested from: Pioneer Global Investments Limited (“PGIL”), 1 George's Quay Plaza, George's Quay, Dublin 2, Ireland. Call +353 1 480 2000 Fax +353 1 449 5000 or from the facilities agent in Ireland, Société Générale, Dublin Branch, 3rd Floor IFSC House, IFSC, Dublin 1 Ireland.

The content of this document is approved by PGIL. This document is not intended for and no reliance can be placed on this document by retail clients, to whom the document should not be provided. PGIL is regulated by the Central Bank of Ireland. In the UK, it is approved for distribution by Pioneer Global Investments Limited (London Branch), Portland House, Bressenden Place, London SW1E 5BH. Pioneer Global Investments Limited is authorised and regulated by the Central Bank of Ireland and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority (“FCA”) is available from us on request. The Schemes are unregulated collective investment schemes under the UK Financial Services and Markets Act 2000 (“FSMA”) and therefore do not carry the protection provided by the UK regulatory system.

This document is addressed only to those persons in the UK falling within one or more of the following exemptions from the restrictions in s 238 FSMA:
  • authorised firms under FSMA and certain other investment professionals falling within article 14 of the FSMA (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, as amended (the “CIS Order”) and their directors, officers and employees acting for such entities in relation to investment;
  • high value entities falling within article 22 CIS Order and their directors, officers and employees acting for such entities in relation to investment;
  • other persons who are in accordance with the Rules of the FCA prior to 1 November 2007 classified as Intermediate Customers or Market Counterparties or on or thereafter classified as Professional Clients or Eligible Counterparties.

The distribution of this document to any person in the UK not falling within one of the above categories is not permitted by Pioneer Global Investments Limited (London Branch) and may contravene FSMA. No person in the UK falling outside those categories should rely or act on it for any purposes whatever.

Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A. group of companies.

For Professional Investor Use Only and Not to be Distributed to the Public.

Date of First Use: 28 April 2017