Capital Group Global High Income Opportunities (LUX)
A consistent source of high income in today’s low-yielding world
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Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
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Results
The information in relation to the index is provided for context and illustration only. The fund is an actively managed UCITS. It is not managed in reference to a benchmark.
Past results are not a guarantee of future results.
Price & Distributions
Portfolio
Risk Considerations
Risk factors you should consider before investing:
- This material is not intended to provide investment advice or be considered a personal recommendation.
- The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
- Past results are not a guarantee of future results.
- If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
- Some portfolios may invest in financial derivative instruments for investment purposes, hedging and/or efficient portfolio management.
- There are additional Bond Connect, Bonds, China IBM, Counterparty, Derivative instruments, Emerging markets, High yield bonds, Liquidity, Operational and Sustainability risks associated with this fund.
Fund risks
Bond Connect risk: Investments in Chinese onshore bonds traded on CIBM via Bond Connect are subject to various risks associated with clearing and settlement, as well as liquidity, regulatory and counterparty risks.
Bonds risk: The value of bonds can change as a result of interest rate changes – typically when interest rates rise, bond values fall. Funds investing in bonds are exposed to credit risk. A decline in the financial health of an issuer could cause the value of its bonds to fall or become worthless.
China IBM risk: The fund may invest on the China Interbank Bond Market. This market can be volatile and subject to liquidity constraints due to low trading volumes. As a result, the price of debt securities traded on this market can fluctuate significantly, spreads may be large, and realisation costs may be significant.
Counterparty risk: Other financial institutions provide services to the fund such as safekeeping of assets, or may serve as a counterparty to financial contracts such as derivatives. There is a risk the counterparty will not meet their obligations.
Derivative instruments risk: Derivatives are financial instruments deriving their value from an underlying asset and may be used to hedge existing exposures or to gain economic exposure. A derivative instrument may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.
Emerging markets risk: Investments in emerging markets are generally more sensitive to risk events such as changes in the economic, political, fiscal and legal environment.
Liquidity risk: In stressed market conditions, certain securities held by the fund may not be able to be sold at full value, or at all. This could cause the fund to defer or suspend redemptions of its shares, meaning investors may not have immediate access to their investment.
Operational risk: The risk of potential loss resulting from inadequate or failed internal processes, people and systems or from external events.
Sustainability risk: Environmental, social or governance event or condition that, if it occurs, could cause an actual or potential material negative impact on the value of an investment of the fund.
The Morningstar Medalist RatingTM is the summary expression of Morningstar’s forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. The Medalist Ratings indicate which investments Morningstar believes are likely to outperform a relevant index or peer group average on a risk-adjusted basis over time. Investment products are evaluated on three key pillars (People, Parent, and Process) which, when coupled with a fee assessment, forms the basis for Morningstar’s conviction in those products’ investment merits and determines the Medalist Rating they’re assigned. Pillar ratings take the form of Low, Below Average, Average, Above Average, and High. Pillars may be evaluated via an analyst’s qualitative assessment (either directly to a vehicle the analyst covers or indirectly when the pillar ratings of a covered vehicle are mapped to a related uncovered vehicle) or using algorithmic techniques. Vehicles are sorted by their expected performance into rating groups defined by their Morningstar Category and their active or passive status. When analysts directly cover a vehicle, they assign the three pillar ratings based on their qualitative assessment, subject to the oversight of the Analyst Rating Committee, and monitor and reevaluate them at least every 14 months. When the vehicles are covered either indirectly by analysts or by algorithm, the ratings are assigned monthly. For more detailed information about these ratings, including their methodology, please go to global.morningstar.com/managerdisclosures/. The Morningstar Medalist Ratings are not statements of fact, nor are they credit or risk ratings. The Morningstar Medalist Rating (i) should not be used as the sole basis in evaluating an investment product, (ii) involves unknown risks and uncertainties which may cause expectations not to occur or to differ significantly from what was expected, (iii) are not guaranteed to be based on complete or accurate assumptions or models when determined algorithmically, (iv) involve the risk that the return target will not be met due to such things as unforeseen changes in management, technology, economic development, interest rate development, operating and/or material costs, competitive pressure, supervisory law, exchange rate, tax rates, exchange rate changes, and/or changes in political and social conditions, and (v) should not be considered an offer or solicitation to buy or sell the investment product. A change in the fundamental factors underlying the Morningstar Medalist Rating can mean that the rating is subsequently no longer accurate. Capital Group did not compensate Morningstar for the ratings and comments contained in this material. However, the firm has paid Morningstar a licensing fee to access and publish its ratings data. The payment of this subscription fee does not give rise to a material conflict with Morningstar.
Resources
Sustainability-related disclosures
Date
This information is valid as of 1st January 2023.
Summary
This fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.
The fund aims to manage a carbon footprint (weighted average intensity) for its investments in corporate issuers that is at least 30% lower than 50% Bloomberg US Corp HY, 2% Issuer Capped Total Return, 20% JPM EMBI Global Total Return, 20% JPM GBI-EM Global Diversified Total Return, 10% JPM CEMBI Broad Diversified Total Return indexes. This will not apply to sovereign issuers. While this fund is actively managed and without any reference or constraints to a reference index, the fund is using these indexes to monitor the investment’s carbon emission. The investment adviser relies on carbon footprint data from a third party provider to carry ongoing monitoring of weighted average carbon intensity (WACI) at the fund level, and may reduce or eliminate exposures to certain companies as necessary.
The investment adviser evaluates and applies ESG and norms-based screening to implement exclusions on corporate and sovereign issuers, with respect to certain sectors such as fossil fuel and weapons. To support this screening, for sovereign issuers, the investment adviser relies on the use of proprietary research. The investment adviser leverages data from third party institutions to calculate ESG scores across the entire sovereign universe. This assessment highlights indicators related to vulnerability to climate change, dimensions of human development, and various measures of governance. Data for each issuer is analysed to compute composite sovereign ESG performance scores. Sovereign issuers that are considered to be poor performing outliers are excluded from the fund’s investment universe.
For corporate issuers, the investment adviser relies on third party provider(s) who identify an issuer’s participation in or the revenue which they derive from activities that are inconsistent with the values and norms-based screens. In the event that exclusions cannot be verified through the third party provider(s), the investment adviser will aim to identify business involvement activities through its own assessment.
The exclusion policy applied by the investment adviser can be found here.
The fund promotes, among other characteristics, environmental and social characteristics, provided that the companies in which investments are made follow good governance practices. Good governance practices are evaluated as part of the investment adviser’s eligibility process. Such practices are assessed through a monitoring process. Where relevant, fundamental analysis of a range of metrics that cover auditing practices, board composition, and executive compensation, among others, is also conducted.
Information on Capital Group’s corporate governance principles can be also found in its Proxy Voting Procedures and Principles. The ESG Policy Statement provides additional detail on Capital Group’s views on specific ESG issues, including ethical conduct, disclosures and corporate governance, available here.
The fund’s carbon constraint does not apply to the entire portfolio, and will apply only to corporate issuers that have carbon emissions data available (reported or estimated). The Capital Group's exclusion policy will apply to the entire portfolio, with the exception of cash holdings and derivatives. The planned asset allocation is monitored continuously and evaluated on a yearly basis.
To measure the attainment of the environmental and/or social characteristics promoted, the fund considers the following principal adverse impacts (PAIs) on sustainability factors:
- Principal Adverse Impact 1 on greenhouse gas emissions.
- Principal Adverse Impact 4 on exposure to companies active in the fossil fuel sector.
- Principal Adverse Impact 10 on United Nations Global Compact violators.
- Principal Adverse Impact 14 on controversial weapons.
Exclusions are primarily identified through a third-party provider, MSCI ESG Business Involvement Screening Research (“MSCI ESG”). Other data points include the United Nations Global Compact and MSCI Carbon Footprint Metrics.
The methodology and sources relating to the exclusions and the ESG integration approach as a whole have certain limitations. When assessing the ESG characteristics of securities and the selection of such securities, subjective judgement within the investment process might be involved. The carbon footprint is measured by the WACI score relative to the relevant index. Excluded from the WACI determination are cash holdings, derivatives, sovereigns and securitised products.
Members of Capital Group's compliance, risk management and internal audit staff conduct periodic assessments on the design and operating effectiveness of the firm’s ESG activities and key controls. Establishing dialogue with companies is an integral part of the investment adviser’s investment management service to clients. This enables the company to engage and generate dialogue on any issues that could affect the company’s long-term prospects, including exposures to sustainability issues.
The fund has not designated a reference benchmark to meet the environmental and/or social characteristics it promotes.
No sustainable investment objective
This fund promotes environmental or social characteristics, but does not have as its objective sustainable investment.
Environmental or social characteristics of the financial product
The environmental and/or social characteristics promoted by the fund are the following:
- In addition to the integration of sustainability risks as part of the investment adviser’s investment decision-making process, the fund aims to manage a carbon footprint (weighted average intensity) for its investments in corporate issuers that is at least 30% lower than 50% Bloomberg US Corp HY, 2% Issuer Capped Total Return, 20% JPM EMBI Global Total Return, 20% JPM GBI-EM Global Diversified Total Return, 10% JPM CEMBI Broad Diversified Total Return indexes. This will not apply to sovereign issuers. In managing to this constraint, the fund is considering Principal Adverse Impact 1 on greenhouse gas emissions.
- The fund evaluates and applies ESG and norms-based screening to implement exclusions on corporate and sovereign issuers. In applying these screens, the fund is considering the Principal Adverse Impact 4 on exposure to companies active in the fossil fuel sector, Principal Adverse 10 on United Nations Global Compact violators and Principal Adverse Impact 14 on controversial weapons. These principal adverse impacts will not apply to sovereign issuers.
The investment adviser can select investments to the extent they do not trigger a breach of the carbon target and are in line with the exclusion policy.
There is no reference benchmark designated for the purpose of attaining the environmental or social characteristics promoted by the fund.
Investment strategy
The fund aims to manage a carbon footprint (weighted average intensity) for its investments in corporate issuers that is at least 30% lower than 50% Bloomberg US Corp HY, 2% Issuer Capped Total Return, 20% JPM EMBI Global Total Return, 20% JPM GBI-EM Global Diversified Total Return, 10% JPM CEMBI Broad Diversified Total Return indexes. This will not apply to sovereign issuers. While this fund is actively managed and without any reference or constraints to a reference index, the fund is using these indexes to monitor the investment’s carbon emission. The investment adviser relies on third party data to carry out ongoing monitoring of WACI at the fund level and may reduce or eliminate exposures to certain companies as necessary.
The investment adviser evaluates and applies ESG and norms-based screening to implement exclusions on corporate and sovereign issuers with respect to certain sectors such as fossil fuel and weapons. To support this screening, for sovereign issuers, the investment adviser relies on the use of proprietary research. The investment adviser leverages data from third party institutions to calculate ESG scores across the entire sovereign universe. This assessment highlights indicators related to vulnerability to climate change, dimensions of human development, and various measures of governance. Data for each issuer is analysed to compute composite sovereign ESG performance scores. Sovereign issuers that are considered to be poor performing outliers are excluded from the fund’s investment universe.
For corporate issuers, the investment adviser relies on third party provider(s) who identify an issuer’s participation in or the revenue which they derive from activities that are inconsistent with the values and norms-based screens. In the event that exclusions cannot be verified through the third party provider(s), the investment adviser will aim to identify business involvement activities through its own assessment.
The exclusion policy applied by the investment adviser can be found here.
The fund promotes, among other characteristics, environmental and social characteristics, provided that the companies in which investments are made follow good governance practices. Good governance practices are evaluated as part of the investment adviser’s eligibility process. Such practices are assessed through a monitoring process. Where relevant, fundamental analysis of a range of metrics that cover auditing practices, board composition, and executive compensation, among others, is also conducted. The investment adviser also engages in regular dialogue with companies on corporate governance issues and exercises its proxy voting rights for the entities in which the fund invests.
Capital Group's ESG Policy Statement provides additional detail on Capital Group’s views on specific ESG issues, including ethical conduct, disclosures and corporate governance. Information on Capital Group’s corporate governance principles can be found in its Proxy Voting Procedures and Principles as well as in the ESG Policy Statement.
Further details can be found in the ESG Policy Statement here.
Proportion of investments
The fund’s carbon constraint does not apply to the entire portfolio, and will only apply to corporate issuers that have carbon emissions data available (reported or estimated). Sovereign, cash holdings and derivatives are also not considered in scope of the carbon constraint.
The Capital Group's ESG exclusion policy will apply to the entire portfolio, with the exception of cash holdings and derivatives.
The planned asset allocation is monitored continuously and evaluated on a yearly basis.
Monitoring of environmental or social characteristics
To measure the attainment of the environmental and/or social characteristics promoted, the fund considers the following principal adverse impacts (PAIs) on sustainability factors:
- Principal Adverse Impact 1 on greenhouse gas emissions.
- Principal Adverse Impact 4 on exposure to companies active in the fossil fuel sector.
- Principal Adverse Impact 10 on United Nations Global Compact violators.
- Principal Adverse Impact 14 on controversial weapons.
The fund applies investment restrictions rules on a pre-trade basis in portfolio management systems to prohibit investment in companies or issuers based on the exclusion criteria. The portfolio also undergoes regular/systematic post-trade compliance checks.
To support this screening, for sovereign issuers, the investment adviser relies on the use of proprietary research. The investment adviser leverages data from third party institutions to calculate ESG scores across the entire sovereign universe. This assessment highlights indicators related to vulnerability to climate change, dimensions of human development, and various measures of governance. Data for each issuer is analysed to compute composite sovereign ESG performance scores. Sovereign issuers that are considered to be poor performing outliers are excluded from the fund’s investment universe.
For corporate issuers, the investment adviser relies on third party provider(s). This allows the investment adviser to identify all publicly traded companies globally that are inconsistent with the applicable ESG and norms-based screens. The third party provider(s) supplies a profile of each company’s specific business involvement in, or the revenue which they derive from, activities that are inconsistent with the values and norms-based screens applied to the fund.
In the event that exclusions cannot be verified through the third party provider(s), the investment adviser will aim to identify business involvement activities through its own assessment.
The investment adviser can select investments to the extent they do not trigger a breach of the carbon target and are in line with the exclusion policy.
Please refer to Capital Group's ESG exclusion policy for further details.
An additional objective of the fund is to ensure that the carbon footprint is at least 30% lower than the securities included in the respective indices. This will not apply to sovereign issuers. The selected indexes are representative of the investment universe of the fund. The investment adviser uses WACI as a metric to measure the fund’s carbon footprint. In calculating the fund’s WACI, the investment adviser relies on a third party data provider. In the event that reported carbon emissions data is not available for a particular issuer, the third party provider may provide estimates using their own methodologies. Issuers that do not have any carbon emissions data available (reported or estimated) are excluded from the WACI calculation. The investment adviser assesses the portfolio WACI on an ongoing basis to help the fund remain within the target level. It is not the intention of the investment adviser to automatically exclude higher carbon emitters on an individual basis.
If the portfolio was in danger of breaching the target, holdings would be adjusted to increase the margin between the portfolio carbon footprint and target level; exposure to selected higher emitters would be reduced with increased exposure to lower emitters, while ensuring the fund’s investment objective is maintained. It is not the intention of the investment adviser to automatically exclude higher carbon emitters on an individual basis. Compliance checks are in place to facilitate this and mitigate the risk of any breach, for example as the result of market movement. Carbon footprint reports use MSCI Carbon Footprint Metrics data.
Methodologies
The fund implements two binding ESG-related criteria: sector- and norms-based screens in the form of exclusions and a carbon footprint target.
Norms-based |
|
| Weapons |
|
| Tobacco |
|
Fossil fuels |
|
Various criteria |
|
Low carbon |
|
1 Companies that have any ties to cluster munitions, landmines, biological/chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, nuclear weapons and/or non-detectable fragments.
2 Defined as weapons systems, components, and support systems and services (does not include controversial weapons).
3 For securities for which this can be measured, currently defined as corporate bonds.
4 Carbon footprint data is based on weighted average carbon intensity. Index refers to eligible corporate bonds within the reference index (50% Bloomberg US High Yield, 2% Issuer Cap Index, 20% JPMorgan EMBI Global, 20% JPMorgan GBI-EM Global Diversified and 10% JPMorgan CEMBI Broad Diversified Index).
The SFDR classification is related to the European Union’s regulation and is not equivalent to approval or recognition as an ESG fund by regulators in Asia Pacific.
- Norms-based analysis determines whether a company complies with the universal principles in the United Nations Global Compact (UNGC).
- Companies that have any ties to cluster munitions, landmines, biological/chemical weapons, depleted uranium weapons, blinding laser weapons, incendiary weapons, nuclear weapons and/or non-detectable fragments.
- As defined by GICS sub-industries.
- Carbon footprint data is based on weighted average carbon intensity (WACI). Index refers to 50% Bloomberg US Corp HY, 20% JPM EMBI Global Total Return, 2% Issuer Capped Total Return, 20% JPM GBI-EM Global Diversified Total Return, 10% JPM CEMBI Broad Diversified Total Return indexes2 and which will only apply to Equities and corporate Bonds.
The exclusionary screens are implemented pre-trade and the carbon target is managed and monitored at the aggregate portfolio level.
The negative screens and carbon target align to the four PAIs listed above.
Data sources and processing
Exclusions are primarily identified through a third-party provider, MSCI ESG Business Involvement Screening Research (“MSCI ESG”). Other data points include the United Nations Global Compact and MSCI Carbon Footprint Metrics.
Capital Group periodically reviews the quality of our service provider organisations’ performance and conducts ongoing monitoring and due diligence activities commensurate with the significance of the services provided.
The fund’s exclusion policy applied can be found here.
Limitations to methodologies and data
The methodology and sources relating to the exclusions and the ESG integration approach as a whole have certain limitations. The fund applies investment restrictions rules on a pre-trade basis in portfolio management systems to prohibit investment in companies or issuers based on the exclusion criteria. The portfolio also undergoes regular/systematic post-trade compliance checks. In the event that exclusions cannot be verified through the third party provider(s), the investment adviser will aim to identify business involvement activities through its own assessment.
When assessing the ESG characteristics of securities and the selection of such securities, subjective judgement within the investment process might be involved.
The carbon footprint is measured by the WACI score relative to the relevant index. The WACI is calculated based on securities for which this can be measured, currently defined as those issued by corporate issuers. Excluded from the WACI determination are cash holdings, derivatives, sovereigns and securitised products.
Due diligence
Members of Capital Group's compliance, risk management and internal audit staff conduct periodic assessments on the design and operating effectiveness of the firm’s ESG activities and key controls. This includes compliance with internal processes and procedures as well as with the regulatory landscape in the jurisdictions in which the company operates. Capital Group meets regularly with the third-party data providers to review the quality of the services provided.
Engagement policies
Establishing dialogue with companies is an integral part of the investment adviser’s investment management service to clients. Capital Group’s investment teams meet on a regular basis with company management, including executive and non-executive directors, chairs and finance directors. This enables the company to engage and generate dialogue on any issues that could affect the company’s long-term prospects, including exposures to sustainability issues.
Where Capital Group's investment teams identify an issue material to the long-term value of a company or they are concerned about relative ESG performance, Capital Group's investment professionals and governance teams will engage with management. The understanding of these issues, as well as management’s response and the steps they take to minimise any associated risks, forms an important part of Capital Group's assessment of management quality, which itself is a key factor in the stock selection decisions.
Designated reference benchmark
The fund has not designated a reference benchmark to meet the environmental and/or social characteristics it promotes.
Disclaimer
This material is issued by Capital International Management Company Sàrl (“CIMC”), 37A avenue J.F. Kennedy, L-1855 Luxembourg, unless otherwise specified, and is distributed for information purposes only. CIMC is regulated by the Commission de Surveillance du Secteur Financier (“CSSF” – Financial Regulator of Luxembourg) and is a subsidiary of the Capital Group Companies, Inc. (Capital Group).
All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company in the US, Australia and other countries. All other company and product names mentioned are the trademarks or registered trademarks of their respective companies.
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