Summary of Investment Objective
The Euro Reserve Fund seeks to maximise current income consistent with preservation of capital and liquidity. The Fund invests at least 90% of its total assets in investment grade fixed income transferable securities denominated in Euros and Euro cash. The Fund will also maintain a weighted maturity of 60 days or less.
Fund Manager's Report (as at Jul 31, 2010)
The Fund matched its benchmark over the month.
The European Central Bank (ECB) kept interest rates unchanged during July, with the main refinancing and deposit rates remaining at their historical lows of 1.0% and 0.25% respectively.
Economic activity was stronger than expected, along with continuing low inflation pressures. Unemployment declined and retail sales rose, while manufacturing and service sector activity both expanded, and business and consumer confidence surveys showed signs of improvement.
Euro money market yields rose notably during July across the maturity spectrum, as market conditions improved. Although the increase in short-term yields is due to normalising market conditions, the recent period of increasing turbulence continues to cause significant price tiering between various money market issuers. High-quality issuers from well-regarded countries continue to yield at levels below LIBOR rates, while lower-quality issuers, especially those from less-regarded.
The portfolio began to take advantage of the rise in LIBORs associated with the recent credit spread widening and the removal of liquidity, post the expiry of the one-year LTRO. Activity extended to the three month area in an effort to capture some of the steepness in the yield curve. We additionally took the opportunity to add a high quality low-beta floating rate note in the one year area at levels above LIBOR. These trades helped to lift both the weighted average maturity and the weighted average life of the portfolio to close to 40 days and 73 days respectively. This was from a substantially de-risked position reached over the second quarter. The Fund continues to hold high levels of liquidity and the core credit strategy continues to remain focused on pursuing the top-tier low beta bank names from our “Approved lists”.
The economic data outturn and regulatory developments regarding the banking sector may have marginally reinforced the market’s reassessment of the relative attractiveness of financial assets in Europe compared to the US. It remains our central view that we will continue to see a slow-but-steady growth recovery in the euro area with very little evidence of inflationary pressures. Monetary policy is likely to remain supportive for some considerable time and the scale of official stability and support measures in the region is sufficient to provide grounds for comfort, particularly as these are unlikely to be withdrawn swiftly.
Fund Fact (as at Jul 31, 2010 )
| Status | Sub-Fund of Luxembourg SICAV |
| Fund Manager | Stuart Niman |
| Launch Date | Jul 24, 2009 |
| Base Currency | EUR (€) |
| Additional Dealing Currencies | - |
| Benchmark | 7 Day Euro LIBID |
| Morningstar Sector | Money Market EUR |
| Total Fund Size (m) | EUR (€) 211.5 |
| Tax Efficient Savings | ISA |
| EUSD Fund Attributes | |
| EUSD Fund Status | in scope, distributions and redemptions |
| Information Source | Portfolio Composition |
| Application Threshold | >40% |
| Holding in Debt Claims | 100.00% |
| Grandfathered Bonds Held | 0.00% |
| Application Start Date | Jan 1, 2010 |
| Application End Date | Dec 31, 2010 |
| TID | 0.000000000 |
| Last Distribution Date | Aug 19, 2010 |
| Fees | % |
| Annual Management Fee (A shares) | 0.45 |
| Codes | |
| ISIN | LU0432365988 |
Risk Grading
Low
High
Non-distributing
Important Information
The information on this website is available to Qualified Investors and Professionals in some jurisdictions on a limited private placement basis subject to applicable laws and regulations in the country of distribution. The information is confidential and should not be reproduced or distributed to persons other than the recipient.
The investment objective stated above is a summary of the main objectives of the Fund. Please refer to the BGF prospectus for full details.
A limited range of BGF sub-funds have a distributor status A share class that seeks to comply with UK Distributor Status requirements. Please contact the Manager for more information.
The fund invests a large portion of assets which are denominated in other currencies; hence changes in the relevant exchange rate will affect the value of the investment. The fund invests in fixed interest securities issued by companies which, compared to bonds issued or guaranteed by governments, are exposed to greater risk of default in the repayment of the capital provided to the company or interest payments due to the fund(s). The amount of credit risk is measured by the issuer’s credit rating which is assigned by one or more independent rating agencies. This does not amount to a guarantee of the issuer’s creditworthiness but provides a strong indicator of the likelihood of default. Securities which have a lower credit rating are generally considered to have a higher credit risk and a greater possibility of default than more highly rated securities. Companies often issue securities which are ranked in order of seniority which in the event of default would be reflected in the priority in which investors might be paid back. The fund invest in fixed interest securities such as corporate or government bonds which pay a fixed or variable rate of interest (also known as the ‘coupon’) and behave similarly to a loan. These securities are therefore exposed to changes in interest rates which will affect the value of any securities held. The fund may invest in structured credit products such as asset backed securities (‘ABS’) which pool together mortgages and other debts into single or multiple series credit products which are then passed on to investors, normally in return for interest payments based on the cash flows from the underlying assets. These securities have similar characteristics to corporate bonds but carry greater risk as the details of the underlying loans is unknown, although loans with similar terms are typically packaged together. The stability of returns from ABS are not only dependent on changes in interest-rates but also changes in the repayments of the underlying loans as a result of changes in economic conditions or the circumstances of the holder of the loan. These securities can therefore be more sensitive to economic events, may be subject to severe price movements and can be more difficult and/or more expensive to sell in difficult markets. Past performance is not a guide to future performance and should not be the sole factor of consideration when selecting a product. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. .
BlackRock Global Funds (BGF) is an open-ended investment company established in Luxembourg which is available for sale in certain jurisdictions only. BGF is not available for sale in the U.S. or to U.S. persons. Product information concerning BGF should not be published in the U.S. It is recognised under Section 264 of the Financial Services and Markets Act 2000. BlackRock Investment Management (UK) Limited is the UK distributor of BGF. Most of the protections provided by the UK regulatory system, and the compensation under the Financial Services Compensation Scheme, will not be available. A limited range of BGF sub-funds have a distributor status A sterling share class that seeks to comply with UK Distributor Status requirements. Subscriptions in BGF are valid only if made on the basis of the current Prospectus, the most recent financial reports and the Simplified Prospectus which are available on our website. Prospectuses, Simplified Prospectuses and application forms may not be available to investors in certain jurisdictions where the Fund in question has not been authorised.
Sources: Fund – BlackRock Investment Management (UK) Limited (BIM(UK)L), Indices - Datastream, BIM(UK)L. Quartiles - Standard & Poor's. BIM(UK)L Risk Grading: High Risk (on a scale of Low, Medium, Medium/High and High). This grading applies to Funds with emerging market, small capitalisation, or narrowly focused/concentrated equity mandates, which may restrict liquidity and increase the volatility of returns. It should only be used for comparison with other BlackRock Global Funds (BGF) and, in particular, should not be used in comparison with Funds not provided by BIM(UK)L. The grading is indicative of the level of risk of a particular Fund and is not supposed to be a guarantee of likely returns. If you are in any doubt as to the level of risk that you should take, you should seek Independent Advice. BIM(UK)L Risk Grading: Low Risk (on a scale of Low, Medium, Medium/High and High). This grading applies to Funds where there is a low expectation of capital loss but where income levels will vary. It should only be used for comparison with other BlackRock Global Funds (BGF) and, in particular, should not be used in comparison with Funds not provided by BIM(UK)L. The grading is indicative of the level of risk of a particular Fund and is not supposed to be a guarantee of likely returns. If you are in any doubt as to the level of risk that you should take, you should seek Independent Advice.Performance is shown as at Jul 31, 2010 in EUR on a NAV price basis with income reinvested. Fund performance figures are calculated net of fees.