UBS Asian High Yield Fund - UBS Asset Management

Asia remains the key driver for global economic growth. With significant monetary and fiscal measures by central banks in Asia, particularly China, Asian high yield fundamentals are solid with attractive yield to offer.

As of 31 July 2020

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1. Attractive return potential

The yields in credit markets offer attractive carry returns. The current spread and yield levels offer an attractive entry point into the Asian high yield market.

Asian USD Credit Market: Yields

Source: Bloomberg. As of end July 2020.

Bloomberg China Credit Impulse

(year-on-year % change)

Source: Bloomberg. As of end June 2020.

2. Supportive macro-trends in Asia

China’s credit impulse growth has been picking up. The Asia markets are supported by significant policy measures and more flexibility in monetary and fiscal policy.

3. Low exposure to commodities

The Asian high yield universe has low exposure to commodity markets. The sector is under pressure from oil price volatility and movement lockdowns. Therefore, default rates in the Asian High Yield space are expected to remain low compared to broader emerging markets and US High Yield. China high yield bonds have shorter duration, so typically they are less sensitive to interest rate changes.

Source: J.P. Morgan. For illustration purposes only. Data available as of end July 2020.
^ TMT stands for Technology, Media and Telecommunications.

Comparatively stable income potential

>6% p.a.*

Yield distribution of UBS Asian High Yield Fund (USD) P-mdist

Distribution Month	Distribution Month	Equivalent Yield (p.a.) *	Equivalent Yield (p.a.) *
Distribution Month	08/2020	Equivalent Yield (p.a.) *	6.4%
Distribution Month	07/2020	Equivalent Yield (p.a.) *	6.5%
Distribution Month	06/2020	Equivalent Yield (p.a.) *	6.9%
Distribution Month	05/2020	Equivalent Yield (p.a.) *	7.0%
Distribution Month	04/2020	Equivalent Yield (p.a.) *	6.1%
Distribution Month	03/2020	Equivalent Yield (p.a.) *	6.3%

Valuations in the Asian High Yield space look attractive as investors get a substantial yield pick-up with lower duration.

Ross Dilkes,
Portfolio Manager, UBS Asian High Yield Fund

Fund Manager Q&A

Source: UBS Asset Management. As of August 2020.
* The share classes with “-mdist” aim to pay dividends on a monthly basis. Dividend is not guaranteed. Dividend may be paid out of capital.
1 Share classes with “-mdist” in their name may make monthly distributions excluding fees and expenses. They may also make distributions out of capital and realized capital gains, at the discretion of the Management Company, or pay distributions out of gross income while charging/paying all or part of a Subfund’s fees and expenses to/out of the capital of the relevant Subfund, resulting in an increase in distributable income for the payment of distributions by the Subfund and therefore, the Subfund may effectively pay distributions out of capital. Any distributions involving payment of dividends out of the fund’s capital or payment of dividends effectively out of the fund’s capital (as the case may be) may result in an immediate reduction of the next asset value per share/unit.
2 A positive distribution yield does not imply a positive return. The share classes with “-mdist” and “-dist” aim to pay dividends on a monthly basis and annual basis respectively. Dividend rate is not guaranteed. Distribution yield = (Dividend per unit on last record date x 12/Record Date NAV) x 100. The distribution yields shown here are for reference only.