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AXA IM launches the AXA WF Euro Inflation Plus fund aiming to outperform Euro area inflation

  • 20 October 2021

  • AXA Investment Managers (AXA IM) has launched the AXA WF Euro Inflation Plus fund that aims to outperform the Euro area inflation, net of ongoing charges, using flexible allocation between nominal and inflation linked bonds, and active breakeven management.

  • The new fund is managed by Jonathan Baltora, Head Of Sovereign, Inflation And FX, and the wider Inflation Team at AXA IM.

AXA Investment Managers (AXA IM) announces the launch of the the AXA WF Euro Inflation Plus fund that aims to outperform the Euro area inflation, net of ongoing charges. The fund manager will use a fexible allocation between nominal and inflation linked bonds and active breakeven management. The fund is actively managed and doesn’t have a traditional bond benchmark, instead its performance will be measured against the Harmonised Indices of Consumer Prices Excluding Tobacco as published by Eurostat.

The Sub-Fund of the Luxembourg-domiciled SICAV aims to reach its performance objective of delivering performance in both bull and bear markets. In the event of accelerated/increased inflation, the fund manager might opt for short maturities inflation linked bonds as well as long inflation breakevens1 strategies. In the event of a slowdown in inflation, the strategy could invest up to 100% of its assets in fixed rate bonds and could also go short on inflation breakevens.

The fund can invest in sovereign nominal bonds as well as corporate bonds (with a limit of 20% of the Net Asset Value (NAV)). It can also leverage opportunities in emerging markets provided that these are OECD members. The fund will only invest in Investment Grade2 fixed income assets. Exposure to those markets can be hedged or not against inflation by using zero coupon inflation swaps3 at the management team’s discretion

The investment strategy is based on three pillars:

  • A discretionary approach to inflation strategies,

  • A flexible allocation between nominal and linkers,

  • A broader asset allocation and income generation: exploiting opportunities in other investment grade fixed income markets. 

The Fund has been categorised as an Article 8 product according to the EU Sustainable Finance Disclosure Regulation (SFDR). On top of AXA IM’s exclusion policies4, the Fund will aim to outperform the ESG score5 of a parallel comparison portfolio constituted of 80% Bloomberg Barclays World Govt Inflation-Linked All Maturities 1-5yr and 20% ICE BofA 1-5 Year Global Corporate Index.

Commenting on the launch, Jonathan Baltora, Head Of Sovereign, Inflation and FX and manager of the AXA WF Euro Inflation Plus fund said: “We believe there is a high probability that the Euro area inflation will remain well above the level of nominal interest rates. As such, it becomes increasingly difficult for European investors to find assets that yield at least the inflation rate while remaining in the Investment Grade universe. Therefore, a product that aims to outperform the Euro area inflation can be a particularly attractive value proposition.”

“Additionally, the fact that the Fund can short inflation breakevens and target a higher ESG rating than investment universe is a true innovation for inflation strategies currently being offered in the market”.

The fund is registered and available to professional and retail investors in Austria, Belgium, Denmark, Finland, France, Germany, Italy (restricted scheme only), Liechtenstein, the Netherlands, Norway, Portugal, the United Kingdom, Spain, Sweden and Switzerland.

  • Break-even inflation is the difference between the nominal yield on a fixed-rate investment and the real yield (fixed spread) on an inflation-linked investment of similar maturity and credit quality.
  • Investment grade refers to the quality of a company's credit. It is a rating that signifies that a municipal or corporate bond presents a relatively low risk of default.
  • A zero-coupon inflation swap (ZCIS) is a type of derivative in which a fixed-rate payment on a notional amount is exchanged for a payment at the rate of inflation. It is an exchange of cash flows that allows investors to either reduce or increase their exposure to the changes in the purchasing power of money
  • AXA IM’s exclusion policies: countries sanctioned by international organizations, climate risk, soft commodities, controversial weapons, Ecosystem Protection Deforestation tobacco, white phosphorus weapons, UNGC breaches and poor ESG quality
  • Details of the methodology and its limits are available in the prospectus.

The value of investments may fall as well as rise and you may not get back the full amount invested.

Risks

Counterparty Risk: Risk of bankruptcy, insolvency, or payment or delivery failure of any of the Sub-Fund's counterparties, leading to a payment or delivery default.

Risk of capital loss: The fund invests in  financial markets and uses techniques and instruments subject to variations that can lead to gains and losses.

Inflation-Linked bonds risk: Inflation-linked bonds are special types of indexed bonds that are tied to indices that are calculated based on the rates of inflation for prior periods. The value of inflation-linked bonds generally fluctuates in response to changes in real interest rates. The market for inflation-linked bonds may be less developed or liquid, and more volatile, than certain other securities markets.

Derivatives and leverage risk: These instruments are volatile and may be subject to various types of risks, including but not limited to market risk, liquidity risk, credit risk, counterparty risk, legal risk and operations risks.

Emerging markets: Some of the securities held in the concerned Sub-Fund may involve a greater degree of risk than generally associated with similar investments in major securities markets, due, in particular, to political and regulatory factors

144A securities risk: The 144A securities are traded between a limited number of QIBs, which may cause a higher price volatility and a lower asset liquidity of certain 144A securities.

Sovereign debt risk: Certain countries are especially large debtors to commercial banks and foreign governments. Investment in such debt obligations, i.e. sovereign debt, issued or guaranteed by such governments or governmental entities involves a higher degree of risk.

Sustainability risks: Given the Sub-Fund’s Investment Strategy and risk profile, the likely impact of the sustainability risks on the Sub-Fund’s returns is expected to be medium.

ESG risks: The integration of ESG and sustainability criteria into the investment process may exclude securities of certain issuers for reasons other than investment and, therefore, certain market opportunities available to funds that do not use ESG or sustainability criteria may be unavailable to the SICAV, and its performance may sometimes be better or worse than that of comparable funds that do not use ESG or sustainability criteria.


Biography 

Jonathan Baltora

Jonathan is the Head of the Sovereign, Inflation & FX team in Paris and Senior Portfolio Manager within our Fixed Income platform. He joined AXA IM in 2010 as a Portfolio Manager for European and Global Inflation-linked bonds portfolios.  In his current role, he is responsible for managing inflation linked bonds, sovereigns and FX. Prior to joining AXA IM, Jonathan worked for four years at Groupama Asset Management where he began his career as a Portfolio Manager, responsible for managing inflation-linked and aggregate portfolios.

Jonathan holds a Master’s degree in Economics as well as a Magistère in Finance, both from the University Paris I Pantheon-Sorbonne.

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    [AXA WF Euro Inflation Plus is a/are sub-fund(s) of AXA World Funds. AXA WORLD FUNDS ‘s registered office is 49, avenue J.F Kennedy L-1885 Luxembourg. The Company is registered under the number B. 63.116 at the “Registre de Commerce et des Sociétés” The Company is a Luxembourg SICAV UCITS IV approved by the CSSF and managed by AXA Funds Management, a société anonyme organized under the laws of Luxembourg with the Luxembourg Register Number B 32 223RC, and whose registered office is located at 49, Avenue J.F. Kennedy L-1885 Luxembourg.

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    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.