H2O Multibonds FCP

Investment rationale

H2O Multibonds FCP is an international bond UCITS classified in “Obligations et autres titres de créance internationaux” and is intended for investors seeking exposure to global rates and currency markets over a recommended minimum holding period of 5 years. As of 31 December 2024, the IEUR share class had a risk indicator of 6 out of 7, and the fund does not offer capital protection. Its objective is framed against short-term rate benchmarks plus a spread, but the portfolio is managed very dynamically across sovereign bonds, credit and currencies, including emerging markets and extensive derivative use.

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How the strategy works

The objective varies by share class and is to exceed the relevant overnight rate benchmark plus a fixed annual spread over the recommended holding period after fees: for example, IEUR targets €STR capitalised daily +3.0% per year, NEUR +2.9%, REUR +2.1%, Q-EUR +3.6%; USD, SGD and CHF share classes use SOFR, SORA and SARON respectively with stated spreads by class. The fund invests mainly in international debt securities and may allocate up to 100% of net assets to OECD sovereign bonds, up to 60% to OECD non-government investment grade bonds, up to a combined 30% to non-OECD sovereign bonds, non-OECD corporate bonds and OECD speculative-grade corporate bonds, up to 20% to ABS/MBS, and up to 10% to contingent convertible bonds; it may also invest up to 10% in other UCITS, AIFs or investment funds. Portfolio sensitivity is managed within a range of 0 to +10, issuers may come from all geographic areas, securities may be in all currencies, and currency risk can reach up to 700%; some share classes are systematically hedged from EUR into CHF, USD or SGD. The reference rates (€STR, SARON, SOFR or 1-month SORA depending on the share class) are the formal benchmarks for objective-setting and performance fee calculation, while JP Morgan Government Bond Index Broad is used only for ex post comparison. The fund is actively managed, can use listed and OTC derivatives, total return swaps within an expected 25% and maximum 50% of net assets, securities financing transactions with expected 30% and maximum 50% usage, and offers mainly capitalisation shares, with REUR (C/D) allowing capitalisation and/or distribution.

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Investment philosophy

• The portfolio is built through a top-down process based on macroeconomic analysis, analysis of capital flows and relative market valuation, with strategic positions, tactical positions and arbitrage across global rates and currencies.

• Exposure is decided first by asset class and separately from other asset classes, with asset allocation resulting from those exposure decisions rather than from a benchmark-driven construction process.

• The manager seeks value from ten levers including overall duration management, relative value across the main OECD government bond markets, yield-curve positioning by maturity bucket, country selection within dollar and European zones, active diversification in non-investment-grade, emerging and corporate bonds, and broad currency allocation including emerging-market currencies.

• The investment universe includes sovereign and corporate debt, money-market instruments, ABS/MBS, convertible and contingent convertible bonds, currencies, UCITS/AIFs within 10% of net assets, and a wide range of exchange-traded and OTC derivatives including futures, options, swaps, FX forwards, CDS and total return swaps.

• Risk controls and operating constraints include portfolio sensitivity between 0 and +10, 0-100% in OECD sovereign bonds, 0-60% in OECD investment-grade corporates, a combined 0-30% in non-OECD sovereigns, non-OECD corporates and OECD speculative-grade corporates, 0-20% in ABS/MBS, 0-10% in contingent convertibles, and daily valuation with swing pricing and a 5% net-redemption gate trigger across all share classes.

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Distinctive features

The fund combines global rates, credit and foreign-exchange strategies within one international bond vehicle, including both OECD and non-OECD exposures and active use of relative-value and arbitrage techniques. Its implementation toolkit spans cash bonds, money-market instruments, derivatives, securities financing transactions and total return swaps, with the ability to invest across all geographic areas and currencies. The share-class range is extensive, covering EUR, USD, SGD and CHF denominations, with systematic EUR/CHF, EUR/USD and EUR/SGD currency hedging for selected classes and dedicated institutional, retail, clean-share and employee share classes. The fund has liquidity management tools including swing pricing and redemption gates.

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Risks

As of 31 December 2024, the IEUR share class had a synthetic risk indicator of 6 out of 7, and the fund offers neither guarantee nor capital protection, so investors may lose all or part of their capital. The fund is exposed to interest-rate risk, credit risk, counterparty risk, currency risk, emerging-market risk, arbitrage risk, equity risk through convertible instruments, and risks linked to leverage, total return swaps, securities financing transactions and collateral management. These risks are driven by the fund’s ability to invest across all geographies and currencies, hold government and corporate bonds including speculative-grade, ABS/MBS and contingent convertibles, and use derivatives to overexpose the portfolio. Liquidity-related risks are particularly relevant for speculative-grade bonds, emerging-market securities and collateral, and class-specific currency hedging does not remove all risk because hedging imperfections and interest-rate differentials can affect outcomes. Sustainability risk includes any environmental, social or governance event or condition that could have a materially negative actual or potential impact on investment value.

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Asset manager

The management company is H2O AM EUROPE, a French simplified joint-stock company authorised by the Autorité des marchés financiers under number GP-19000011 and located at 39 Avenue Pierre 1er de Serbie, 75008 Paris. H2O AM EUROPE is part of the H2O Asset Management group. Financial management is partially delegated to H2O MONACO S.A.M., a Monaco public limited company authorised by the Commission de contrôle des activités financières de Monaco under number SAF 2017-04, with registered office at 24, boulevard Princesse Charlotte, Monte-Carlo, 98000 Monaco. Fund accounting and valuation are delegated to CACEIS Fund Administration, while CACEIS Bank acts as depositary, custodian and centralising agent.

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