What are hold-to-maturity funds and how do they work?
Hold-to-maturity funds are a special type of bond funds, as they have a subscription period and a fixed investment period. At the end of the fixed term, the fund is liquidated, and the fund assets are repaid to the investors.
Typical characteristics of hold-to-maturity funds
Broad diversification of fund assets across a large number of corporate bonds from different issuers, countries and sectors
Defined end of term, fixed term of the fund
Plannable investment horizon
Please note: Redemption of fund units before the end of the term can lead to losses, as they significantly increase the risk and one might get back less than invested.
Further information on our hold-to-maturity funds
During the subscription period, investors have the opportunity to decide how much money they want to invest. During this time, the money is not immediately invested in the capital markets but is, so to speak, "collected."
At the start of the fund, the capital collected during the subscription period is invested in securities. From this point on, it is subject to capital market developments.
During the investment period, the fund realises income such as redemption proceeds from bonds on the one hand and buys and sells securities on the other.
At the end of the term, the entire fund assets are paid out automatically.
Important notes: The portfolio value at the end of the term may also be lower than the original investment due to distribution policy, market fluctuations, fund costs or defaults. Deterioration in creditworthiness can lead to price falls and defaults. Rising interest rates can lead to price falls. Redemption of fund units before the end of the term can lead to losses, as they significantly increase the risk and one might get back less than invested.
Difference between bond funds and hold-to-maturity funds
Classic bond funds do not have a fixed term. Investors can invest, buy or sell units at any time. In the fund itself, securities are bought or sold flexibly depending on the investment strategy and market situation in order to benefit from market opportunities and realise any additional income.
Hold-to-maturity funds have a fixed investment period and a defined maturity date at which the capital realised is repaid to the investors. There is also a difference in the management of the fund, as the selected bonds are usually held in the fund until they mature and are not sold again when a favourable market opportunity arises.
Hold-to-maturity funds can be subscribed to during the respective subscription period – with your advisor. The assets collected during the subscription period are invested at the beginning of the fund term.
Raiffeisen Capital Management's hold-to-maturity funds invest in fixed-interest corporate bonds of varying credit quality. The allocation is largely to issuers with good to very good credit ratings. The smaller portion is invested in bonds with poorer credit ratings (high-yield bonds). The individual bonds are selected in such a way that they can be held in the fund until maturity if possible.
Why do the hold-to-maturity funds invest in corporate bonds instead of the comparatively "safer" government bonds?
Corporate bonds generally offer higher yields than government bonds, as they also harbour a higher risk. Price and capital losses can therefore not be ruled out.
Additionally, corporate bonds offer the opportunity to further diversify the fund's assets, meaning not only investing in different countries but also in various companies, credit ratings, and industries.
Our hold-to-maturity funds invest in bonds from companies that are categorised as sustainable according to ESG criteria. A sustainability concept that has been proven over many years is used in this process. While this may slightly reduce the available investment universe, the focus on ESG also excludes many riskier issuers from the selection.
Although this means sacrificing one or two earnings, it offers other advantages: Companies that focus on sustainability are often more stable in the long term and more resilient to regulatory changes and environmental risks. With our sustainable investments, we support companies that are committed to responsible business practices. This can have a positive environmental and/or social impact in the long term.
In addition, the investment actively contributes to sustainable development and thus also to the protection of our planet, which can also benefit future generations.
Still have questions? We are happy to support you!