Funds affected by ECB action on VW bonds

Investors in a number of fixed income funds will be affected if the reported move by the ECB to stop buying asset backed VW bonds in light of the car company’s emissions scandal holds fast.

The ECB’s bond buying programme is part of its efforts to inject stimulation into the eurozone economy.

Reviewing data from FE Analytics suggests that there are, for example, a number of German market mutual funds that have exposure to various fixed interest instruments issued by VW. Like many car manufacturers, VW has used financial instruments to help it structure loans to car buyers. Passive funds including ETFs are also affected by their exposure to VW bonds.

Some of the affected bond funds have performed well over the standard 36 month period over which many peer comparisons take place. However, it is not yet known exactly how much of a hit their performance may take going forward if Europe’s biggest purchaser of bonds – the ECB – retains a ‘no buy’ policy in place for any extended period of time.

Also noteworthy is the fact some of the relevant fixed income securities have only been incorporated into portfolios relatively recently.  The securities include both fixed dated bonds and perpetuals.

Funds 1m % change 3m 6m 1yr 3yr 5yr 10yr
Candriam Bonds USD C Cap in EU 1.01 0.53 -3.84 15.31 18.89 33.53 57.91
Danske Global Corporate Bond A in EU -1.05 -0.62 -3.39 -0.19 16.40 28.39 37.36
Sparinvest Corporate Value Bonds EUR R in EU 0.15 -1.58 -2.10 -0.90 13.07
Lyxor UCITS ETF Euro Corporate Bond ex Financials C EUR in EU -0.37 0.06 -1.74 0.10 9.63 18.43
Amundi ETF Euro Corporate Ex Financials Iboxx in EU -0.36 0.05 -1.78 0.05 9.59
HSBC Trinkaus Corporate Bonds Europa MC TR in EU -1.58 -3.09 -6.17 -3.45 8.87 13.21 28.53
Amundi ETF Euro Corporates in EU -0.20 0.39 -1.67 -0.29 8.82 19.70
Threadneedle Absolute Return Bond R Gr Acc in EU -0.68 -5.66 -2.15 5.96 7.82 16.56
Flossbach von Storch Bond Total Return R TR in EU -0.55 -0.57 -3.85 0.79
Hermes Multi Strategy Credit F Acc USD in EU 1.04 -2.48 -3.14 13.83
Hermes Absolute Return Credit F Acc USD in EU 0.87 -1.05

(Source: FE; funds ranked by 3-year performance)

SRI angle

The impact of the VW scandal has also been highlighted by Hans-Christoph Hirt, director at Hermes EOS, the SRI specialist part of the business.

The manager “welcomed the resignation of Volkswagen CEO Martin Winterkorn” as well as the appointment of new CEO Matthias Müller, who as CEO of Porshe has worked within the Volkswagen group for decades.

But, Hirt also warned of the appointment of too many existing company insiders to deal with the fallout of the scandal.

“The new CEO and the incoming chair should overhaul Volkswagen’s corporate governance, including the composition and effectiveness of its supervisory board, and create a corporate culture which ensures that the trust of customers and society will never again be jeopardised in the way it has in the past.”

“Following intensive engagement with Volkswagen on corporate governance issues between 2006 and 2009, including speeches at the Annual General Meetings in 2006 and 2007, we have repeatedly raised concerns about aspects of Volkswagen’s corporate governance.”

“We plan to attend the Extraordinary General Meeting of Volkswagen on 9 November 2015 and on behalf of a group of investors will explain our concerns and suggest changes to the company’s corporate governance and culture to other shareholders and the management and supervisory boards.”

“In the meantime, we are in contact with Volkswagen and other car manufacturers and are intensifying our engagements in the light of the emissions scandal.”

According to information published over the weekend, Sweden’s biggest financial daily Dagens Industri has published a list of what it says are the affected car models from the VW group:

  • VW Jetta (2009 – 2015)
  • VW Jetta Sportwagen (2009 – 2014)
  • VW Beetle (2012 – 2015)
  • VW Beetle Cab (2012 – 2015)
  • VW Audi A3 (2010 – 2015)
  • VW Golf (2010 – 2015)
  • VW Golf Sportwagen (2015)
  • VW Passat (2012 – 2015)
  • Audi A1 (Year unknown)
  • Audi A3  (Year unknown)
  • Audi A4 (Year unknown)
  • Audi  A6 (Year unknown)
  • Skoda Fabia (2009-2013)

Data from the International Council on Clean Transportation Europe suggest the Golf alone accounted for nearly 4% of all new car sales in Europe in 2013.

 

 

 

 

 

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