Mirabaud - Global Diversified Credit Fund A cap. EUR

Performance update

May saw positive total returns in credit but negative returns in US Treasuries as credit spreads continued their recovery on positive trade war progress. Rates markets became increasingly concerned with government fiscal deficits. There was progress on tariffs, with the US first announcing a deal with the UK and then a 90-day reduction on tariffs for China. These developments, combined with solid economic data, reduced expectations for an imminent global recession. Global high yield spreads rallied to retrace 73% of the moves since the end of February. In contrast, the US 30yr Treasury moved +26bps wider, trading above 5%. The curve steepened after Moody's downgraded its rating on the US to AA1 and Trump's tax bill was passed by the Senate, causing markets to focus on the US fiscal deficit and adding a risk premium to US Treasuries.

In terms of fund performance, the largest positive contributions came from high yield and subordinated financials, which benefitted from spread tightening. The largest positive sector contributions came from financials, materials and consumer discretionary.

Portfolio activity

We further reduced our credit hedges during the month to reflect trade war progress and the reduced chance of a global slowdown – although we remain cautious as the damage from uncertainty and tariffs is likely to feed into the wider economy eventually. We reduced some cyclical risk in Adler Pelzer and Park River, and added to selected financials.