JKC Asia Bond 2025 – Fixed Maturity Fund April 2025 Update:

• A largely flat performance from Asian credit markets in March as US Treasury bonds remained rangebound and credit spreads widened
• A risk off tone on global markets stemmed from increased unpredictability of US trade policy: US equity weakness weighed heavily on high beta credit markets
• Nevertheless, Asia credit outperformed on the downside as China stimulus optimism offsets trade fears
• JKC Asia Bond 2025 portfolio returned +0.2% in March reflecting its blended HY and IG status
• In March we continued our strategy of extending the maturity of the fund to maximize returns and reduce refinancing risk in 2H25.

In March, Asian USD bond markets failed to maintain the strong positive momentum seen in the previous month as a risk off tone in global equities weighed heavily on credit spreads. High beta CDS markets such as US High Yield (HY) and European crossover saw the biggest widening moves. Meanwhile, although Asian credit markets notably outperformed on the downside over this period, Asian cash indices were only able to eke out flat gains with the Investment Grade (IG) heavy benchmark Asian Dollar Bond Index (ADBI) returning -0.04% during the month while the high yield AHBI Index returned +0.35% over the same period. The JKC Asia Bond 2025 portfolio (USD share class) returned +0.2% reflecting its now blended exposure to both IG and HY segments. That move took year-to-date return to 1.15% on a net basis which annualizes to 4.6%, broadly in line with the fund’s average yield.

It was a volatile but ultimately rangebound month for US Treasury bonds with the 10-year yield moving in a 20bps range but ultimately ending March at 4.2%, unchanged from the level at the end of February. The short end of the curve (where our portfolio is exposed) faired somewhat better with the 1-year US Treasury yield declining 6bps in March. Nevertheless, the US rates market still exhibits a great deal of uncertainty as the erratic policy making under the new Trump administration raises doubts on both the growth and inflation outlook for the US economy. Admittedly the US Federal reserve did maintain its relatively stable signaling at its March meeting as rates were kept unchanged and the “dots” chart continued to forecast two rate cuts in 2025. However, the market remained unconvinced as US consumer sentiment indices have begun to plummet on the fears of a resurgence in inflation driven by the US government’s hawkish stance on trade and tariffs.

Asia’s resilience on the other hand appears to be driven by continued hopes that China is willing to ease macro-economic conditions to offset any potential negative headwinds that rising US tariffs might have on its economy. Indeed, at its annual “two sessions” meeting held last month the China’s National People’s Congress reiterated its 5% annual GDP and 4% fiscal deficit targets for 2025 while at month end the government announced a USD72bn equity capital injection into four of its largest state banks. It is likely that these funds will be used to offset further write-downs on property exposure but we believe we are approaching the bottom of the China property cycle as the pace of contract sales declines continues to come down. On a more positive note, strong earnings and outlook from Tencent and Alibaba painted a strong picture for the China technology sector as optimism about AI-fueled growth continued to build.

For the JKC Asia Bond portfolio we maintained our strategy of extending duration to bring the maturity profile as close as possible to the December 2025 fund maturity date. As a result, the weighted average maturity has been extended to November (vs July at the start of the year). We also continued to reduce exposure to distressed bonds where we see little prospect of recovery. Currently distressed issued account for less than 0.40% of the fund’s positioning and we will look for opportunities to reduce this weighting further.