Highlights | Focusing on Fixed Income Investments for Stable Income Returns

I. Basic product information and subscription schedule (00:00:06 ~ 00:01:36)

The Bosera Stable Income 18-Month Regular Open Bond Fund has officially entered its third subscription window. From next Monday (May 18th) to June 1st, it will be open for subscription for a total of 10 business days, after which it will enter an 18-month closed period.

Since its inception in May 2023, the product has achieved an annualized return of 6.78%, with a one-year return of 9.85%. It has delivered positive returns for 11 consecutive quarters and is considered particularly suitable for low-risk bottom-position allocation by high-net-worth clients and for investment immigration account fund allocation.

II. Investment Strategy: Short Duration + High Credit Rating + Diversified Enhancement (00:01:42 ~ 00:06:03)

The core strategy of the product focuses on medium-short duration, medium-high credit rating US dollar bonds, with coupon income as the base return source. This is supplemented by diversified strategies such as IPO participation, leverage enhancement, and interest rate/credit/convertible bond trading. It does not pursue high returns through credit downgrading, strictly controlling duration risk and credit risk.

III. Performance Comparison and Competitive Advantages (00:06:03 ~ 00:08:35)

After-fee returns have significantly outperformed the 5-10 year U.S. Treasury Index, the 1-3 year short-end U.S. Treasury Index, and the Bloomberg Asia Investment Grade USD Bond Index, with volatility better than all the aforementioned benchmark indices.

IV. Value of Investment Immigration Account Allocation (00:17:29 ~ 00:26:07)

This product is a Hong Kong-registered OFC fund, explicitly meeting the HKD 30 million threshold requirement for qualifying investable assets under the investment immigration scheme. Compared to purchasing individual bonds directly, the fund offers diversification, professional dynamic management, and institutional-level financing cost advantages.

The product can employ up to 40% leverage, whereas individuals cannot directly apply leverage within investment immigration accounts. Through the fund, investors can compliantly enjoy enhanced returns from leverage, and the overall portfolio utilization rate is also higher than that of ordinary open-ended funds.

V. Market Outlook: Interest Rates and Bond Market Analysis for 2026 (00:27:10 ~ 00:31:48)

The overall market volatility is expected to enter a recovery channel from the repair lows of 2024-2025 in 2026, with rising uncertainty.Short-term US Treasury yields are expected to fluctuate within the current range (no rate hikes or cuts), with more clarity possible in Q3-Q4. Long-term US Treasury yields will likely remain range-bound from Q2 to Q3, with potential downside after Q4. The strategy is to maintain a neutral duration in the short term, with the possibility of moderately overweighting duration before year-end.

VI. Highlights of Q&A

Q: What impact will the US-Iran conflict and the rise of AI stocks have on such products?

A: Market volatility is expected to be in an overall recovery phase in 2026. Short-term bonds, due to their shorter durations, are less sensitive to interest rate fluctuations, keeping price volatility manageable. Inflation pressures brought by the AI theme in the short term delay rate cut expectations, but productivity gains in the medium to long term follow a deflationary logic, making rates likely to fall after Q4, benefiting bond prices. Credit spread shocks caused by geopolitical disruptions are mitigated by the portfolio's short-duration, high-rated bonds, which offer relatively strong defensive characteristics.

Q: What exactly are diversified strategies, and how much excess return do they bring to the portfolio?

A: There are four main types of strategies:

1. New bond issuance participation – Participate in discounted primary market issuances and sell in the secondary market to capture new issuance returns;

2. Curve riding (Roll Down) – Select bonds with optimal durations based on market judgment, holding them for a period to capture capital gains;

3. Leverage carry trade – Finance through repo operations (cost around 4.0-4.1%) to invest in bonds yielding 5.0%, capturing a spread of approximately 100 basis points;

④ Duration and credit swing trading — Adjusting portfolio duration and credit exposure in stages. The aforementioned strategies have consistently contributed alpha beyond the base return from coupon payments, serving as the core source of outperformance compared to the industry average (5-6%) over the past three years, while strictly controlling position sizes and avoiding excessive risk-taking.

Q: What is the potential impact of private credit risk on the fund?

A: Private credit risks are real and currently in the early to middle stages of development. It is necessary to continuously monitor three levels:

① Deterioration in the credit quality of underlying software-related entities;

② Investor runs on private credit funds;

③ Contagion mechanisms between private credit and traditional financial institutions.

The current assessment suggests that it is not yet sufficient to cause a systemic shock to the overall credit market, so investment in credit bonds will not be halted.

Q: Where does the funding for monthly distributions come from?

A: The sources include two parts:

① Coupon income generated monthly by bonds held in the portfolio;

②Capital gains from the rise in bond prices (contributing to the increase in net asset value of the fund).

It is not only coupon payments that can be distributed as dividends; distributions can be made once the overall valuation of the fund increases. Historically, while this fund has consistently paid dividends, both the unit net asset value and total net asset value of the fund have continued to grow, demonstrating that dividend payouts have not eroded principal.

Q: What is the redemption mechanism for the product, and can it be redeemed during the lock-up period?

A: The product features a 'soft lock' design, allowing redemptions during the lock-up period but with associated fees: a 2% redemption fee for months 1-12, and a 1% redemption fee for months 13-18. Redemption fees are credited to the fund's assets (not the manager’s income), benefiting remaining investors. There are no redemption fees during the 18-month open period. Investors are advised to confirm that their funds will not be needed for the next 18 months before purchasing. The minimum subscription for USD shares is $100, and for HKD shares is $1,000 (a public offering fund with no high threshold restrictions).

The above content is for reference only and does not constitute investment advice. If you are interested in fixed-income allocation or investment migration account strategies, feel free to discuss in the comments section.

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