I understand. Hide this message.

X

This site uses cookies. Learn More. »

Pioneer Investments - Consultant Update

Latest thought pieces and news from Pioneer

Expecting the Unexpected

If the year 2016 has taught us anything, it is to be prepared for the unexpected. It was a year when the seemingly unlikely came to pass. As we start the New Year there is, arguably, a more significant sense of uncertainty about how the year will develop than we have seen in some time, particularly when we consider geopolitics, this could lead to another year of volatile market conditions for investors.

Click here to read more »

Macroeconomic Outlook for 2017

We believe that a new economic growth and inflation narrative will dominate in the coming twelve months. The global economic environment is set to become more dynamic with global GDP growth projected at 3.6% in 2017, but regional divergences will also widen. The effects of Trump’s policies on the US economy and geopolitical equilibrium, a more active fiscal policy in Developed Markets, and in some Emerging Economies, combined with a busy electoral cycle in the Eurozone will likely shape the investment landscape in 2017.

Click here to read more »

US Dollar Bull Market Regains Momentum into 2017

The US dollar bull market entered its fourth consecutive year in 2016, but a key driving factor—monetary policy divergence that underpinned the rally—was losing its potency. However, the surprising US election result has signified a defining moment for the US dollar that allowed it to regain its momentum in the final months of 2016 and we believe factors are aligning for the rally to enter its fifth consecutive year.

Click here to read more »

Blue Paper: Emerging Markets Evolution

This is the second in a series of papers on current issues in Emerging Markets investing. In this paper we consider issues that can restrain returns, frustrate investors and elevate volatility. While the developing world offers a large, heterogeneous investing environment, a series of inefficiencies at the sovereign, corporate and index level can challenge returns. It is our view that governments, and companies, in the emerging world could improve their, and investors’, prospects through superior governance and transparency.

Click here to read more »

Pioneer News

On 12 December 2016, UniCredit, Pioneer Investments’ parent company, signed a binding agreement with Amundi, a leading European asset management firm, for Amundi to acquire Pioneer Investments. This transaction will position the resulting combined company as the 8th-largest asset manager globally, it will have a presence in over 30 countries and cover all major investor segments offering a diverse range of investment products and solutions with a steadfast commitment to client service. We believe this to be a highly complementary transaction, both in terms of investment capabilities and geographic coverage and represents a major step forward in our endeavour to offer you continuous added-value. We expect this transaction to close in the first half of 2017 and we will keep you closely informed as to further developments.



Pioneer Investments Performance Update

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



U.K 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

James Aylward
Client Director
Tel: +44.20.7190.2086
Email: james.aylward@pioneerinvestments.com



Follow Our Blog







Expecting the Unexpected

'There are known knowns... There are known unknowns. That is to say, there are things that we now know we don't know. But there are also unknown unknowns.’

Donald Rumsfeld, then US Secretary of State for Defence, February 2002,


If the year 2016 has taught us anything, it is to be prepared for the unexpected. It was a year when the seemingly unlikely came to pass: Brexit and a Donald Trump presidency both became a reality, apparently against all odds. But possibly the biggest surprise has been the market reaction to these ‘tail events’. Far from prophesising economic disaster – as many commentators did prior to the events – markets have adopted a strongly risk-on stance, with many key equities markets ending the year on a high note.

That said, 2016 also saw markets exhibit a fair amount of volatility and as we start the New Year there is, arguably, a more significant sense of uncertainty about how the year will develop than we have seen in some time.

First and foremost are geopolitical concerns – with the inauguration of Donald Trump as US President heading that list. At the time of writing, we are yet to know whether, and how, the promises made during Trump’s election campaign will be enacted. However, we do know that much has already been priced into markets in terms of reflationary benefits and any perceived reneging of these election promises could see a reversal of these moves.

In the UK, the uncertain progress in the Brexit negotiations could lead to a slowdown in companies' willingness to invest and economic activity in general. Prime Minister Theresa May and her government still do not appear to have a defined Brexit strategy and there are continuous press reports about divisions in the UK government related to its Brexit strategy. This year has already seen the resignation of the UK’s ambassador to the EU and the upcoming Supreme Court ruling about the parliamentary process when triggering Article 50 could create further upheaval prior to the government’s self-imposed end-March deadline. Despite this backdrop of tension and uncertainty, the FTSE 100 reached record levels at the start of this year. But how long can this market’s optimism last without being underpinned by concrete fundamentals?

Staying on the political theme, a busy year of elections in Europe provides another area of unpredictability for how 2017 will pan out. National elections are scheduled to be held in the Netherlands, France, Germany and possibly Italy in the next 12 months and although established pro-European parties appear to be the likely winners in all countries, there are significant risks in each country that an anti-European party may poll better than expected. To reiterate our theme, we cannot discount the unexpected from becoming reality.

If we continue to focus on Rumsfeld’s ‘known unknowns’, central bank policy will be closely watched again this year and always has the capacity to unsettle markets. It is our view that markets may be too sanguine about the path of Federal Reserve monetary policy - should the US economy, which is already running at close to full employment, receive a significant growth boost from Trump’s policies, we believe the Fed could be forced to tighten interest rates at a faster pace than currently envisaged.

In short, predicting how markets will behave during any year is a difficult business and 2017 is no exception. What do we expect to see, however, is another year of volatile market conditions. We have highlighted some of the structural risks on our radar above, but in these sensitive times you can also not discount the ‘unknown unknowns’. This is why we, at Pioneer Investments, believe it is crucial to take a more risk-aware approach by setting up efficient hedging strategies and broadening sources of diversification in a bid to protect portfolio assets.

Additionally, several of our own investment strategies incorporate hedging as part of their portfolio construction. Macro Hedging is one of the four pillars of our Multi-Strategy team’s investment process and is a core component of how they manage their Absolute Return Multi Strategy and Multi-Strategy Growth capabilities. By maintaining an independent macro hedging focus, the team seek to assess risk to the core macro strategy and thereby consider cost efficient ways to protect the portfolios from any ‘tail risk’ events. Similarly, our Multi-Asset Credit team use an integrated hedging approach within their Dynamic Credit strategy with the aim of providing a more effective risk management approach and help mitigate drawdown risk.

To find out more information on these strategies, please click on the below links:

Click here for Dynamic Credit profile »
Click here for Absolute Return Multi-Strategy profile »
Click here for Multi-Strategy Growth profile »

Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 9 January 2017.



Back to top


Pioneer Investments Performance Update


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 0.06 10.69 4.41 7.22 7.50
Benchmark -0.73 11.16 4.49 5.84 6.93
Source: Pioneer Investments, 30/012/16. 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 relatively low global growth, economic uncertainty, the potential for increased volatility and bond valuations, the Portfolio has been positioned more defensively in terms of Asset Type, Sector and Quality Distributions relative to the blended index.
  • In terms of Asset Type Distribution, the Portfolio’s allocation to the more compelling areas within the opportunity set helped drive performance for the quarter. Exposure to segments of the credit market that the team identified as exhibiting attractive compensation for the associated risk was beneficial. At the end of Q4, the Portfolio’s largest exposures were in high yield and high grade corporates while the remainder was in leveraged loans. Compared to the custom benchmark, at year-end, the portfolio had an active underweight to investment grade fixed income and out of benchmark exposure to bank loans.
  • With regards to Sector Distribution, the Portfolio’s focus is mostly on sectors that the team believe are largely domestic, fee or subscription based in nature or have favourable regulatory trends. At the end of the period, the largest exposures were in energy, banking/financial services, healthcare and media.
  • The Portfolio’s Quality Distribution was largely focused on BB, and BBB rated instruments by quarter-end, representing a 65% portfolio weight relative to the blended benchmark weighting of 48%. Furthermore, relative to the blended benchmark weighting for ‘A to AAA’ rated instruments of approximately 27%, the portfolio ended the year at 10%. Finally, in terms of exposure to the lower quality segments of the credit market (CCC), the blended benchmark had 5.9% weight to CCC, whereas the portfolio weight was 1.85%.


Back to top


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 year
(%)
Inception
(%pa)*
Pioneer Funds - Dynamic Credit 2.50 13.32 3.62 4.06
Source: Pioneer Investments, 30/12/16. 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
  • Looking ahead, the team feel rates may continue to come under pressure as the paradigm begins to shift towards higher levels of growth - leading to greater levels of inflationary pressure. The team believe the portfolio is well suited for the upcoming environment as it is positioned with adequate levels of floating rate exposure. They also believe that credit will continue to do well in the upcoming year as expectations for future growth have expanded.
  • From a sector positioning standpoint, during the fourth quarter the Portfolio’s exposures to selected consumer cyclical-related sectors were reduced in the belief that while consumer economic indicators are favourable, relative valuations have become less attractive in areas such as autos and gaming. These exposures were replaced with ILS and municipal bond exposures.
  • At the end of the fourth quarter, the portfolio’s largest exposures were in HY corporates, IG corporates, and securitised credit such as CMBS. To implement the portfolio’s allocation shifts efficiently, the team continued to utilise synthetic credit products (such as derivatives). As always, flexibility in the Portfolio’s positioning is maintained in order to navigate shifts as well as volatility in the fixed-income markets.
  • The portfolio continues to be positioned more defensively in terms of sector allocation and credit-quality concentration. Given increased uncertainties regarding the strength of the U.S. Dollar as well as future U.S. trade policy under the new administration, the current focus is mostly on sectors that are largely domestically-oriented, are fee or subscription based in nature, that have favourable regulatory trends, and that tend to be more resilient during the back half of business cycles. The team continue to focus on owning securities of higher-quality, more liquid issuers.
  • The markets did not exhibit any of the characteristics that would cause the Portfolio’s structural hedging strategy to be deployed, as these hedges are designed to help mitigate drawdown during multiple standard-deviation events in the credit markets. (Standard deviation is a statistical measure of volatility; a lower standard deviation indicates less volatility.)


Back to top


Absolute Return Bond (targets cash +2%-4% or cash +3%-5% p.a.)*

Our Absolute Return Bond Strategy 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 fund has a drawdown limit and profit target. The commentary refers to the Pioneer Funds - Absolute Return Bond. In December 2013, we launched a dedicated Pioneer Funds - Sterling Absolute Return Bond which targets cash +3-5%*.

Gross Performance in EUR* 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since strategy change**
(%pa)
Pioneer Funds - Absolute Return Bond -0.62 -1.76 -1.34 0.32 0.65
EONIA -0.09 -0.32 -0.11 0.00 0.15
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Absolute Return Bond, Class H, gross of fees, EUR in EUR terms. *The target return can be exceeded or undershot and should not be construed as an assurance or guarantee. Target is gross of fees. **The investment strategy changed on 10 December 2010
  • The portfolio delivered negative returns during the fourth quarter.
  • Within the Currency alpha sleeve, a position favouring the U.S. Dollar worked well this quarter. The U.S. Dollar has experienced a stronger trend since end-September and was helped by Donald Trump’s victory in the U.S. Presidential election, which led to higher inflation expectations and higher yields.
  • The Interest Rate Scandinavia alpha sleeve also contributed to performance. The team initiated a short position in Swedish 10 year bonds in early September as it was felt that the yield for these bonds had reached historic lows and was likely to move higher given the Swedish central bank (“Riskbank”) was expected to announce a further tapering of bond purchases in the near-term. This position worked well as the market also factored in this higher chance of tapering.
  • A number of positions in the Special Opportunities alpha sleeve contributed to performance. A long position in US inflation was a notable performer, as U.S. inflation expectations spiked higher in the aftermath of Donald Trump’s victory, which also benefited a similar position in European inflation.
  • The Interest Rates Dollar Bloc alpha sleeve underperformed over the quarter. A long position in 2-year Canadian bonds was implemented in the expectation that Canadian yields would not rise given the state of the local economy. Unfortunately, the broader rise in bond yields globally pushed Canadian short-dated yields higher and led to this position underperforming.
  • The Interest Rates Asia alpha sleeve held long positions across China, Malaysia, India and Korea during the period. However, this positioning underperformed as the push higher for global bond yields was more pronounced in Asian markets. These positions were closed prior to year-end, but not before they had a significant negative impact on performance.
  • In terms of overall duration profile, the Portfolio ended the quarter with a duration of -2.31 years.


Back to top


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 1.33 4.87 4.83 5.31 5.04
EONIA -0.09 -0.32 -0.11 0.00 0.27
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Absolute Return Multi-Strategy, Class I, gross of fees, 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.
  • The Portfolio posted a positive return for the quarter
  • The Portfolio is managed on a “Four Pillar” investment approach. During the quarter, the Macro Strategy pillar, which represents the team’s “Base Case” view of the world, underperformed overall. The “Eurozone Duration” strategy was impacted by a sell-off in Global Bonds and the “Equity Risk Premia” strategy suffered due to a short MSCI World position. On the other hand, the “European Equity” strategy performed strongly as European bourses shrugged off the result of the Italian referendum; and the “Global High Yield “ strategy benefited from spread narrowing amid a belief that stronger economic growth should support corporate earnings.
  • In the Satellite Strategies Pillar, the thematic equity strategy, “European Banking Union” added value. Although fundamentals remain weak and the European Banking sector has been adversely affected by the ECB’s negative interest rate policy, the team believe there are reasons to be positive.
  • In the Selection – “Spread” strategy, “Non-Financial” credit made money as spreads narrowed back towards recent lows on renewed risk appetite after widening in November.
  • The Macro Hedging pillar detracted from performance - this Investment Pillar seeks to provide a buffer to performance during periods of market stress and the Volatility and Credit hedges underperformed during the quarter.
  • Looking ahead, the team intends to follow the same strategy that was successful in 2016: attempting to avoid large losses; focusing on risk management; being flexible and opportunistic in the allocation of risk; and focusing on low beta strategies and using optionality extensively.


Back to top


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, 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 2.78 8.48 8.14 8.03 5.75
EONIA -0.09 -0.32 -0.11 0.00 0.27
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Multi-Strategy Growth, Class I, gross of fees, in EUR terms, **class launch (I unit class): 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. On the 4th of January 2016 Pioneer Funds - Absolute Return Multi-Strategy Growth was renamed Pioneer Funds - Multi-Strategy Growth. Until the 04th of January 2016, the Sub-Fund had different characteristics and performance was achieved under circumstances that no longer apply.
  • The Portfolio posted a positive return for the quarter
  • The Portfolio is managed on a “Four Pillar” investment approach. During the quarter, the Macro Strategy pillar, which represents the team’s “Base Case” view of the world, underperformed overall. The “Eurozone Duration” strategy was impacted by a sell-off in Global Bonds and the “Equity Risk Premia” strategy suffered due to a short MSCI World position. On the other hand, the “European Equity” strategy performed strongly as European bourses shrugged off the result of the Italian referendum; and the “Global High Yield “ strategy benefited from spread narrowing amid a belief that stronger economic growth should support corporate earnings.
  • In the Satellite Strategies Pillar, the thematic equity strategy, “European Banking Union” added value. Although fundamentals remain weak and the European Banking sector has been adversely affected by the ECB’s negative interest rate policy, the team believe there are reasons to be positive.
  • In the Selection – “Spread” strategy, “Non-Financial” credit made money as spreads narrowed back towards recent lows on renewed risk appetite after widening in November.
  • The Macro Hedging pillar detracted from performance - this Investment Pillar seeks to provide a buffer to performance during periods of market stress and the Volatility and Credit hedges underperformed during the quarter.
  • Looking ahead, the team intends to follow the same strategy that was successful in 2016: attempting to avoid large losses; focusing on risk management; being flexible and opportunistic in the allocation of risk; and focusing on low beta strategies and using optionality extensively.


Back to top


Emerging Markets Bond

Our flagship Pioneer Funds - Emerging Markets Bond hard currency fund was launched in 2000 and is managed by our experienced Emerging Markets Bond team who are based in London. The team also manage a local currency and specialist EM Corporate and EM Corporate High Yield portfolios. The fund adopts a multi sector approach to the asset class with active asset allocation between government and corporate issues depending on the market environment.

Gross Performance in GBP 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)*
Pioneer Funds - Emerging Markets Bond 3.88 33.06 16.30 13.07 10.86
95% JPM EMBI Global Diversified, 5% JPM Cash 1 Month Euro 0.79 30.57 16.24 10.35 9.81
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Emerging Markets Bond, Class I, gross of fees, EUR in GBP terms, *class launch (I unit class): 03/06/02
  • The Portfolio delivered a strong performance over the fourth quarter, outperforming its benchmark.
  • Geographically, the team maintain conviction in Brazil, where value continues to be seen in Petrobras as well as some less well-researched areas.
  • In China, the portfolio is diversified with exposure to Financials, Industrials, Real Estate and Energy. Broadly, the Chinese portfolio remains oriented toward higher yielding names, while the benchmark offers exposure to a more investment grade universe.
  • In Indonesia, the team has been more pessimistic in recent months and are currently underweight, with most exposure in the credit arena.
  • The portfolio also remains underweight in the Philippines, where the team believe risks are not fully reflected in prices and would need to see domestic demand cool to a more sustainable level before changing this stance.
  • At year-end, the portfolio’s strategy remains broadly defensive, though less so than in the previous quarter. The core view that U.S. rates will likely continue to rise is reflected in the portfolio’s duration positioning. Wary of credit risk in the current market, the Portfolio is positioned with the aim of offering a substantially lower spread duration than the benchmark, where it is around 2 years short.


Back to top


Euro High Yield Strategy

Gross Performance in GBP 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)*
Pioneer Funds - Euro High Yield 0.75 26.84 6.52 10.63 10.96
BA/ML Euro HY Constrained Index 0.47 26.35 5.90 10.64 10.02
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Euro High Yield, Class E, gross of fees in EUR in GBP terms, *fund inception: 05/12/2005. Class E is reserved for Italian investors only.
  • The portfolio generated positive returns over the quarter and outperformed the benchmark
  • The portfolio’s positioning in Banking, Energy and Healthcare added to performance with additional benefit being derived from the portfolio’s short duration position.
  • The portfolio’s positioning within the Banking sector had a positive impact on performance. The portfolio’s spread overweight added to performance, and its off-benchmark positions in AT-1’s and subordinated issues of high quality, solid and well capitalised banks further contributed. However, some performance was lost through security selection in the Retail, Utilities and Airlines sectors.
  • The portfolio is defensively positioned and holds an underweight position in Cyclicals in BBs. The overweight positioning in Emerging Markets has been maintained, as well as the small overweight in Greek debt, via a short-dated bond. The team remains comfortable in the credit risk that has been assumed in the region.
  • Adding to relative performance was the portfolio’s off-benchmark exposure to leveraged loans. The team has built a c.5% exposure to the sector 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 they consider 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 currently has a short duration position of 3.2 years, versus the benchmark’s duration of 3.3 years.


Back to top


Global Aggregate Strategy

Gross Performance in GBP 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Inception
(%pa)*
Pioneer Funds - Global Aggregate Bond -3.03 19.32 8.63 4.98 8.71
Barcap Global Aggregate Index -2.30 21.77 10.05 4.91 7.94
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Global Aggregate Bond, Class I, gross of fees in EUR in GBP terms, *fund inception: 13/02/2008
  • The Portfolio performed negatively this quarter and underperformed the benchmark.
  • Within the Currency alpha sleeve, a position favouring the U.S. Dollar worked well this quarter. The U.S. Dollar has experienced a stronger trend since end-September and was helped by Donald Trump’s victory in the U.S. Presidential election, which led to higher inflation expectations and higher yields.
  • The Interest Rate Scandinavia alpha sleeve also contributed to performance. The team initiated a short position in Swedish 10 year bonds in early September as it was felt that the yield for these bonds had reached historic lows and was likely to move higher given the Swedish central bank (“Riskbank”) was expected to announce a further tapering of bond purchases in the near-term. This position worked well as the market also factoring in this higher chance of tapering.
  • The long-standing short Chinese Renminbi position against the U.S. Dollar within the Event Driven China alpha sleeve added to overall performance this quarter as the Chinese authorities allowed their currency to depreciate against the U.S. Dollar. The rate moved from 6.67 at the start of the quarter to 6.95 by year-end.
  • The Interest Rates Dollar Bloc alpha sleeve underperformed over the quarter. A long position in 2-year Canadian bonds was implemented in the expectation that Canadian yields would not rise given the state of the local economy. Unfortunately, the broader rise in bond yields globally pushed Canadian short-dated yields higher and led to this position underperforming.
  • The Interest Rates Asia alpha sleeve held long positions across China, Malaysia, India and Korea during the period. However, this positioning underperformed as the push higher for global bond yields was more pronounced in Asian markets. These positions were closed prior to year-end, but not before they had a significant negative impact on performance.
  • In terms of overall duration profile, the Portfolio ended the quarter with a duration of 4.62 years, versus the benchmark’s duration of 6.43 years.


Back to top


Global High Yield Strategy

The Pioneer Funds - Global High Yield was launched in 2004 and is managed by our U.S. fixed income investment team. The fund adopts a flexible approach to investing in the asset class with allocations to U.S., European and Emerging Markets High Yield issues. The team adjust the asset allocation in line with their views on the market environment.

Gross Performance in GBP 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since Inception
(%pa)*
Pioneer Funds - Global High Yield 6.23 36.74 13.01 11.29 11.22
Barclays Global High Yield Index 4.93 36.31 14.33 12.06 13.08
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Global High Yield, Class I, gross of fees, EUR in GBP terms, *fund inception (I unit class): 15/10/07
  • The portfolio posted a positive return and outperformed its benchmark during the fourth quarter.
  • The portfolio’s currency allocation was the largest contributor to outperformance, mainly driven by an underweight to the Euro, as the U.S. Dollar continued to rally. Exposure to the Mexican peso hurt performance post the U.S. election, with the currency falling almost 7% in the quarter. The portfolio’s overall short duration positioning also helped.
  • Security selection was positive, driven mainly by selection within Banking, Consumer Cyclicals and Consumer Non-Cyclicals. Partially offsetting this were selections within Insurance and Energy.
  • Asset allocation was also positive. The overweight to Energy and underweight allocation to Emerging Market (EM) sovereign debt benefitted performance, while out-of-benchmark positions in treasuries, catastrophe bonds and convertibles detracted from performance.
  • The portfolio is underweight lower quality credits, such as the CCC and below rated tiers and distressed names. This high quality bias was a negative contributor to relative performance throughout 2016.
  • Given the significant tightening in spreads experienced in 2016, the team does not anticipate similar returns going forward. They believe the strong fundamentals should continue to support current valuations, while income from coupons remains attractive. High yield is well priced at this point and the portfolio is holding a little more cash versus historical norms to be ready to move should market sell-offs occur.


Back to top


Strategic Income Strategy (Multi-Sector Fixed Income)

Pioneer Funds - Strategic Income is a broad bond fund which invests in the full range of asset classes within fixed income. These include US Treasuries, Municipal Bonds, Mortgage and Asset Backed Securities, Investment Grade Corporate Bonds, High Yield Bonds and Emerging Markets Debt. The fund has an absolute return bias and employs active allocation between the asset classes.

Gross Performance in USD 3 months
(%)
1 year
(%)
3 years
(%pa)
5 years
(%pa)
Since Inception
(%pa)*
Pioneer Funds - Strategic Income -0.57 7.86 3.99 5.53 7.22
Barcap U.S. Universal Index -2.61 3.91 3.28 2.78 4.55
Source: Pioneer Investments, 30/12/16. Performance refers to Pioneer Funds – Strategic Income, Class I, gross of fees in USD, *fund inception: 04/04/2003
  • The portfolio delivered negative returns for the quarter, but outperformed its benchmark.
  • Portfolio positioning seeking to mitigate the impact of rising interest rates accounted for the significant outperformance for the quarter. Portfolio returns benefitted from four factors over the quarter—duration positioning, sector allocation, security selection and credit quality positioning. The relative short duration position of the portfolio of approximately 0.95 years, compared to the benchmark, helped performance, as yields rose dramatically over the quarter.
  • The portfolio benefitted from sector allocation, particularly the 3% TIPS exposure and the 30% underweight to nominal U.S. Treasuries. In addition, the 4% overweight to Industrials and 7% allocation to CMOs helped performance.
  • Portfolio returns were helped by the lower average credit quality of its holdings within Industrials, particularly the overweight to HY Industrials. In addition, the lower average credit quality within Financials and ABS contributed to performance.
  • The Portfolio also benefitted from security selection, particularly within Industrials and Financials. Security selection within Industrials benefitted from the overweight to Energy and the strong performance of energy credits.
  • On the other hand, non-U.S. Dollar currency exposures hurt returns, reflecting the sell-off of the Mexican Peso with Trump’s election.
  • Looking ahead, the Portfolio continues to be positioned for rising interest rates and a stronger economy. The overweight to credit/underweight to U.S. Treasuries is maintained based on the team’s belief that most U.S. government debt is currently unattractive, while credit sectors may benefit from stronger growth, lower taxes, and less regulation.


Back to top


Pioneer Global Investments Limited
London Branch
Portland House,
Bressenden Place,
London, SW1E 5BH
 

Important Information

Unless otherwise stated all information contained in this document is from Pioneer Investments and is as at 31 December 2016. 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 – Strategic Income, Pioneer Funds – Absolute Return Bond, Pioneer Funds –Absolute Multi-Strategy, Pioneer Funds – Multi-Strategy Growth Pioneer Funds – Dynamic Credit, Pioneer Funds – Emerging Markets Bond, Pioneer Funds – Global High Yield, Pioneer Funds – Euro High Yield and Pioneer Funds – Global Aggregate Bond are sub-funds of Pioneer Funds (together with Pioneer Institutional Solutions, the “Funds”) a fonds commun de placement established under the laws of the Grand Duchy of Luxembourg.

The funds, 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.

The content of this document is approved by Pioneer Global Investments Limited. 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: 31 January 2017