Capital Group Global Corp Bond Hedged (CIM0161AU) Report & Performance

• For the three months ended 31 December 2022, Capital Group Global Corporate Bond Fund Hedged (AU) returned 3.1%1 before fees, while the index returned 2.7%2 . Net of fees, the fund returned 3.0%3 . Over the oneyear period, the portfolio returned -14.8%1 before fees and -15.3%3 after fees. The index returned -15.4%2 over the one-year period.
• Security selection was the biggest contributor to fund results, adding 62 bps to gross excess returns. These gains were partially offset by losses from sector/industry selection, which cost 17 bps of relative returns.
• Security selection within the banking sector was the largest overall contributor, in particular HSBC, which made the highest contribution to returns for the fund. HSBC’s bonds benefitted from an easing of COVID restrictions in China, which helped to significantly reduce some of the key tail risks that were facing the bank. However, the strength of the banking sector over the quarter meant that relative results were negatively impacted by underweight positions in the sector, with a below-index weight in Citigroup the largest overall detractor. Other bank underweights that detracted included Barclays, Bank of America and JPMorgan Chase.
• Security selection in the Electric sector was a further contributor to fund returns. This included overweight positions in Pacific Gas and Electric (PG&E) and Edison International, which have both continued to do well in these uncertain times. Bonds from both companies were within the top 5 contributors to portfolio returns by issuer.
• Security selection and an overweight to the consumer cyclical sector benefitted relative returns. The largest contribution was the fund’s non-index position in Netflix. The company once again beat market expectations in its third-quarter earnings release.
• The largest detractor from fund relative returns at a sector level were holdings in the Treasury market, which were impacted by tightening credit spreads.

• Over the month, Capital Group Global Corporate Bond Fund Hedged (AU) returned 4.3%1 before fees, while the index returned 4.1%2 . Net of fees the fund returned 4.2%3 . For the 12-month period, the fund returned -14.4%1 before fees, and -14.9% after fees3 , compared to the index’s return of -14.9%2 .
• Security selection was the biggest contributor to relative returns over November. Duration and curve positioning also added value to a lesser extent. In contrast, sector/industry allocation detracted from returns on a relative basis.
• Security selection and, to a lesser extent, a below-index holding in the banking sector lifted relative returns. Above-index holdings in HSBC, NatWest Group and CaixaBank were among the largest contributors at an issuer level, although below-index positions in Bank of America, Goldman Sachs and JPMorgan Chase were among the largest detractors.
• The choice of issuers in the consumer non-cyclical sector also boosted results on a relative basis. In particular, overweight holdings in Philip Morris International and BAT Capital were helpful, as was a non-index holding in British American Tobacco. • Conversely, the selection of bonds in the communications and energy sectors had a negative impact on relative results. • The portfolio’s cash holdings also weighed on returns on a relative basis.

• Over the month, Capital Group Global Corporate Bond Fund Hedged (AU) returned -0.5%1 before fees, while the index returned -0.6%2 . Net of fees the fund returned -0.6%3 . For the 12-month period, the fund returned -17.9%1 before fees, and -18.4% after fees3 , compared to the index’s return of -18.1%2 .
• Security selection was the biggest contributor to relative returns over October. Duration and curve positioning were slightly negative, as was sector/industry allocation on a relative basis.
• An underweight position in the other investment-grade corporate sector was helpful for relative results, with security selection adding value to a lesser extent.
• The choice of issuers in the electric sector boosted returns on a relative basis. Overweight positions in Pacific Gas and Electric and Edison International were among the largest contributors at an issuer level.
• Conversely, both an underweight position and security selection in the consumer non-cyclical sector weighed on relative results.
• The banking sector was an area of relative weakness, with overweight holdings in NatWest Group and SVB Financial Group among the largest detractors. However, an underweight exposure to the sector did mitigate some of the negative impacts.

• For the three months ended 30 September 2022, Capital Group Global Corporate Bond Fund Hedged (AU) returned -4.7%1 before fees, while the index returned -4.8%2 . Net of fees, the fund returned -4.8%3 . Over the one-year period, the portfolio returned -17.4%1 before fees and -17.9%3 after fees. The index returned -17.7%2 over the one-year period.
• Security selection had a beneficial impact on relative results, but sector/industry selection detracted. The portfolio’s duration exposure also weighed on relative returns, while curve positioning was marginally positive.
• Security selection within the banking sector was detrimental to relative returns, especially overweight positions in Credit Suisse and HSBC, though an underweight to the sector helped slightly. Credit Suisse continued to suffer on the back of negative news headlines. It failed to reassure investors about the strength of its balance sheet. Bond prices dropped to record lows over the quarter, reflecting concerns about the company’s restructuring programme. Credit default swaps also spiked, meaning the cost of buying insurance against it defaulting on its debt soared to record highs. Spreads for the banking sector in general have been trading wide. Banks are inherently confidence-sensitive levered institutions that in the current market environment and backdrop could tend to underperform the broad index during risk-off periods. In our opinion, HSBC remains a solid bank with operations in both the UK and Hong Kong. Business risks appear manageable even in a recessionary scenario thanks to strong long underwriting processes, rising rates, strong capital and excellent liquidity.
• Security selection in the insurance sector detracted, particularly an overweight holding in Zurich Insurance Group. It’s been a difficult year for insurers who have continued to face losses and have also suffered on the back of worldwide economic uncertainty.
• Security selection in the communications sector benefitted relative returns. A non-index position in Netflix was the portfolio’s largest positive contributor at an issuer level. The company lost less subscribers than anticipated during the second quarter, projected a rapid return to growth and grew its market share.

Over the month, Capital Group Global Corporate Bond Fund Hedged (AU) returned -3.1%1 before fees, while the index returned -3.2%2 . Net of fees the fund returned -3.2%3 . For the 12-month period, the fund returned -14.0%1 before fees, and -14.5% after fees3 , compared to the index’s return of -14.3%2 .
• Curve positioning weighed on relative results, with security selection also detracting slightly. Sector/industry allocation added to relative value modestly, while duration positioning had a neutral impact on a relative basis.
• Security selection in the insurance sector weighed on relative results, although an above-index exposure was slightly helpful on a relative basis. At an issuer level, an above-index holding in AXA was among the largest relative detractors.
• The choice of issuers among communications companies had a negative impact on relative returns. An aboveindex position in Magallanes was a key relative detractor at an issuer level.
• Conversely, the choice of issuers in the consumer non-cyclical sector had a positive impact on relative results. In particular, an above-index holding in BAT Capital was among the largest relative contributors at an issuer level.
• An above-index allocation to emerging market corporate bonds was beneficial to relative returns. At an issuer level, a non-index position in ENN Clean Energy and an above-index holding in Bangkok Bank boosted returns on a relative basis.

Over the month, Capital Group Global Corporate Bond Fund Hedged (AU) returned 3.3%1 before fees, in line with the index2

Net of fees the fund returned 3.3%3 . For the 12-month period, the fund returned -11.4%1 before fees, and -12.0% after fees3 , compared to the index’s return of -11.7%2 . • Security selection had the largest positive impact on relative results, with curve positioning providing a more modest uplift on a relative basis. Meanwhile, sector/industry allocation was the largest relative detractor. The portfolio’s short duration positioning was also a drag on relative returns given the rally in global bonds over July.

The choice of issuers in the communications sector had a positive impact on relative results. In particular, a non-index holding in Netflix was among the largest contributors at an issuer level. • The choice of securities in the capital goods sector lifted relative returns. At an issuer level, above-index positions in Boeing, General Electric and Raytheon Technologies helped to boost returns on a relative basis