Invest in the fast-growing bond market

UBS China High Yield Fund

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Attractive income opportunity in zero-interest-rate age

China is the second largest bond market globally. China's offshore bond market also offers investors enhanced diversification, liquidity, and broad investment opportunities with attractive yield. 

as of end Dec 2020

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1. Attractive yields

China high yield bonds offer relatively attractive yields and a positive fundamental outlook. Longer term, we hold a positive outlook on the China high yield sector with the continued accommodative stance of central bank policies and sound credit fundamentals.

Asset class

Asset class

Yield (%)

Yield (%)

Asset class

China USD High Yield

Yield (%)

7.3

Asset class

Asia High Yield

Yield (%)

6.8

Asset class

USD High Yield

Yield (%)

4.2

Asset class

EUR High Yield

Yield (%)

3.4

Source: Bloomberg, J.P. Morgan. As represented by Bloomberg Barclays US Aggregate Corporate Index, Bloomberg Barclays Euro Aggregate Corporate index, JACI Investment Grade, JACI China Investment Grade, Bloomberg Barclays US Corporate High Yield Index, Bloomberg Barclays Pan-European High Yield Index, JACI Non-Investment Grade, and JACI China Non-Investment Grade. As of end December 2020

2. Focus on total return, not just yield 

The Fund focuses on attractive risk adjusted returns and total return, not just yield. Through active management, dynamic risk positioning, and diligent security selection, the Fund seeks to generate attractive total returns throughout market cycles.

3. Lower default rate prospect

Our current default forecast for the Asian credit universe is 3-4%1, whereas we expect China high yield defaults to be even lower around 2%1 as the space benefits from better starting point fundamentals and targeted support by the government for the corporate sector.

1 UBS Asset Management, as of end of Q4 2020.

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Important information

UBS (HK) Fund Series – China High Yield Bond (USD)

1. The Fund, UBS (HK) Fund Series – China High Yield Bond (USD) (or “UBS China High Yield Fund”) invests primarily in debt securities issued by entities which are domiciled or generate a predominant share of their sales and/or their profits in greater China.

2. The Fund intends to invest at least 70% of its net assets in non-investment grade bonds (i.e. assigned with a rating of below BBB- by Standard & Poor’s or Fitch Ratings or below Baa3 by Moody’s) or bonds which are unrated. Such securities are generally subject to lower liquidity, higher volatility and greater risk of loss of principal and interest than high-rated debt securities.

3. The Fund’s investments in emerging markets, e.g. PRC, may involve a greater risk than developed markets including sharp price movements, liquidity risk and currency risk. The Fund’s investment in a single market may be subject to higher level of risks comparing to a fund investing in a more diversified portfolio/strategy. Under extreme market circumstances, the Fund may suffer substantial loss.

4. The Fund may use financial derivative instruments (”FDI”) for hedging and investment purposes. Although FDI will not be used extensively for investment purposes, the use of derivatives may involve additional risks, e.g. leverage, liquidity, counterparty risks.

5. Specifically for the A-mdist unit class(es), the Fund may at the discretion of the Manager make distributions out of capital or out of gross income while charging/paying all or part of the Fund’s fees and expenses to/out of capital of the Fund, resulting in an increase in the payment of dividends by the Fund. Payment of dividends out of capital or on a gross-of-fee basis may result in an immediate reduction of the net asset value per unit. Any distributions out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment.

6. Investors should not invest in the Fund solely based on this document and should read the relevant offering document.