In June, the USD share class returned 0.48%, outperforming its benchmark, the Bloomberg Global Aggregate Corporate Index, by 0.16%.
Since its 10 October 2023 inception, the USD share class has outperformed the benchmark by 1.25% p.a. net with an absolute annualised return of 8.57% net of fees compared to the index return of 7.32%.
The Funds current (30th June) weighted average yield to expected maturity is 5.40% compared to the index’s 5.06%. The Fund’s weighted-average credit rating of A is one notch better than the index’s A- rating.
Markets continued to recover as geopolitical tensions eased. The US-Iran conflict de-escalated further after President Trump announced that an agreement was “now complete” and authorised an end to the naval blockade. The reopening of the Strait of Hormuz helped Brent crude fall 21% to $72.92 per barrel, leaving oil close to pre-conflict levels and reducing near-term inflation concerns.
Market performance diverged across regions. Resilient US employment data and the appointment of Kevin Warsh as Federal Reserve Chair led investors to price a more restrictive US policy path. The S&P 500 fell 1% and Bitcoin declined 20%, while the 10-year US Treasury yield rose 3bps. By contrast, European and Japanese equities performed well: the Euro Stoxx 50 gained 4.7%, the FTSE 100 rose 1%, and the Nikkei 225 returned 5.7%. European government bonds also outperformed, with Bund and Gilt yields falling 8bps and 6bps respectively. Investment-grade credit remained resilient, with US and European spreads widening by only 2bps and 1bp.
Primary issuance remained exceptionally strong, defying the normal seasonal slowdown. Both the US and European investment-grade markets recorded their busiest June on record, as issuers took advantage of relatively stable credit spreads and continued investor demand.
US investment-grade issuance reached $206bn, taking year-to-date supply to $1.24tr, approximately 32% ahead of the same point last year. Corporate borrowers accounted for 62% of monthly supply, led by landmark $25bn transactions from NVIDIA and SpaceX.
The fund participated selectively in the NVIDIA and SpaceX transactions, focusing on shorter- and intermediate-dated bonds and avoiding the longer maturities. By month-end, several long-dated bonds had widened materially, illustrating the importance of active valuation discipline.
Financial issuance also offered selective opportunities. We participated in transactions from Macquarie and Bank of New Zealand. Bank of New Zealand’s floating-rate bond tightened 6bps overnight, while Macquarie’s Tier 2 transaction offered a modest concession relative to comparable bank capital instruments.
European investment-grade issuance totalled a record €90bn, split relatively evenly between Financials and Corporates. Despite the greater-than-expected supply, Financial deals averaged 2.6 times subscribed, indicating that investor demand remained healthy.
European issuers generally concentrated supply in shorter maturities, reflecting investor caution around adding duration. We participated in attractively priced transactions from Morgan Stanley, DNB and Nationwide, which offered positive new-issue concessions and performed well after launch.
NTT was the standout European corporate transaction, issuing across both euro and sterling markets. Overall demand was relatively subdued because the company had already issued earlier in the year, but selected tranches offered attractive value. The 12-year euro and 3-year sterling bonds rallied 6bps and 3bps respectively after pricing.
Australian issuance reached A$15.9bn, around 15% above June 2025. Activity was dominated by offshore “kangaroo” issuers rather than the major domestic banks. We participated across transactions from Asian and European financial institutions, including DBS, OCBC, Commerzbank and Rabobank, with most deals delivering positive initial performance.
Overall, June demonstrated the ongoing resilience of global credit markets. Record supply was absorbed without significant market disruption, but performance varied across transactions. The portfolio remained focused on selective participation, favouring issues offering attractive relative value opportunities.
