What are hold-to-maturity funds and how do they work?
Hold-to-maturity funds are
How do hold-to-maturity funds work?
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
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.
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.
How to invest in hold-to-maturity funds?
Hold-to-aturity funds can be subscribed to during the respective subscription period – with your advisor or online, e.g. via the Raiffeisen online banking portal (ELBA). The assets collected during the subscription period are invested at the beginning of the fund term.
You can currently invest in the new hold-to-maturity fund Raiffeisen-Mehrwert-ESG 2028 III.
Subscription period starts now - it ends on 21 March 2025!
New fund with a fixed term: Raiffeisen-Mehrwert-ESG 2028 III
The European Central Bank began a new rate-cutting cyle* in the summer.
Due to the current interest rate level, we are issuing a new sustainable hold-to-maturty fund with a fixed term.
The fund enables investors to benefit from current market returns for the next three years. It is by no means the same as a savings account. During the term of the fund, the fund assets are subject to fluctuations in bond prices and the risks of the capital markets, which can lead to capital losses.
The new fund Raiffeisen-Mehrwert-ESG 2028 III is aimed at private and institutional investors. The most important facts at a glance:
Subscription period: 24.02.2025 - 21.03.2025
Fund launch: 25 March 2025
Fixed term of approx. 3 years
Term end: 28 April 2028
The fund invests worldwide in corporate bonds and exclusively in bonds from companies that are categorised as sustainable according to ESG criteria.
Focus on security: Investment-grade bonds make up around 80% of the fund portfolio, with the remaining 20% accounted for by high-yield bonds.
The fund portfolio is very broadly diversified and will consist of around 120 issuers.
Capital losses cannot be ruled out.
Please note: For purchases during the fund’s maturity period, an additional market-based subscription fee of up to 2% will be charged. A flat redemption fee of 1% will be charged for early redemptions before the fund reaches maturity. Both the subscription and redemption fees flow entirely into the fund assets and serve to protect existing investors.
Further information on our hold-to-maturity funds
Fixed-interest securities – the basis of our hold-to-maturity funds
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 invest in corporate bonds?
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.
Why invest in "sustainable" bonds?
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.
The investment strategy of Raiffeisen-Mehrwert-ESG 2028 III allows for investment predominantly in demand deposits or callable deposits during the final month of the term.
* A rate-cutting cycle refers to a phase in economic policy during which a central bank or other relevant authority systematically and repeatedly lowers key interest rates. This is typically done to stimulate economic activity, especially during periods of economic slowdown or recession. By lowering interest rates, borrowing money becomes cheaper, which is intended to encourage investment and consumer spending.
*A "priced-in" interest rate cut means that the majority of capital market participants already expect the central bank to cut interest rates. This expectation is already factored into the current prices of equities, bonds and currencies.
*The key interest rate determines the conditions at which banks can borrow money from the ECB. These costs influence the interest rates that banks charge on loans or deposits (= deposit rate). If the key interest rate is lowered, the interest rates for loans and savings accounts often fall as well.
Still have questions? We are happy to support you!