Credit risk

Credit risk is the risk of a decline in the credit quality of a private issuer. A deterioration will lead to an increase in the risk taken by the investor insofar as this deterioration signifies an unfavorable change in the probability of default of the issuer.

Thus, when the probability that the issuer will default increases, investors demand a higher risk premium compared to government bonds ("spread").

The lower the credit quality of the debt, the higher the credit risk. This risk is greater if the issuer falls into a "speculative grade" category, that is, if its rating is equal to or below BB+ (source: S&P/Fitch) or Ba1 (source: Moody’s) or the equivalent according to the Management Company's criteria. In some cases, it is possible for a given issuer to default even if normal conditions prevail across the market.

The occurrence of such an event may reduce the net asset value of the concerned UCITS.