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Nordic Corporate Bond Fund (Class R) advanced during November with 1.30 percent. Since year-end, the NAV per share has consequently decreased by 0.93 percent. Equities and credit markets developed strongly in November, despite a worrying increase in the spread of Corona virus and an outcome in the US presidential election which in advance, from a market point of view, was predicted to reduce risk appetite. Investors seem to have caught on to positive news about vaccine candidates that are expected to soon be approved and that vaccinations could thus begin at the beginning of next year.
With strong market development and the end of the reporting period, activity in the Nordic primary market picked up towards the end of the month, including issues from a couple of first-time issuers.
Among the month's largest contributors was the credit management company Intrum, which held a capital market day during the month. Intrum launched an efficiency program that aims to digitize large parts of the business, in addition, growth ambitions were adjusted slightly down in favour of increased profitability. The company continues to guide that leverage ratio will fall over the next two years.
The payment service and credit management company Melin Group also developed strongly after presenting its quarterly report, which showed marginally higher revenues and improved margins compared with the previous year. The company is under pressure from lower debt collection fees in Norway but is considered to be able to compensate for this partly through a changed revenue model and growth in new segments.
Among other major contributors were Euro bonds from Dometic and Balder, the strong development for these can be seen as the market now more clearly expects an end to the Corona restrictions next year.
On the negative side were mainly bonds from Golar LNG Partners, whose bonds fell slightly in value. Golar presented its quarterly report on the last trading day of the month, cash flow was strong, and leverage was reduced slightly. Furthermore, progress was reported in the negotiations with the banking syndicate on a refinancing of the bank loans maturing this spring. A successful refinancing opens for an early redemption of the company's bonds before May 2021.
During the month, a new investment was made in Mercell Holding, a company that operates a digital platform for public procurement, which issued bonds to acquire the competitor Visma Commerce. Mercell shows stable growth and a high proportion of recurring revenues, with the acquisition the company becomes a clear leader in the Nordic market and has continued expansion opportunities in the rest of Europe. In addition, subordinated bonds from Länsförsäkringar Bank were added. As Sweden's fifth largest bank, Länsförsäkringar Bank has consistently gained market share in recent years and has repeatedly been reported to have very high customer satisfaction. The bank is appreciated for its high quality in lending, which is dominated by mortgages, which has resulted in consistently low credit losses.
The risk sentiment in the financial markets was marked by the US presidential election and positive news regarding potential Corona vaccines. The US presidential election was predicted to be a relatively easy win for the challenger Joe Biden but was initially more even than predicted. When President Trump won both Florida and Ohio there were probably many who drew their thoughts back to 2016 election. Given the extensive postal vote, this election was somewhat different and more protracted in producing a winner. As expected, Biden won the postal votes by a good margin and took home the election in its entirety. However, there are still legal processes to be worked out before the outcome settled. Encouragingly on a “smooth” transition, President Trump has allowed Biden to start his succession planning, which should mean that he acknowledges the direction the legal processes seem to be heading.
During the month came the long-awaited news about potential Corona vaccines. First out was Pfizer, which showed an efficiency of 90 percent among the participants in its phase 3 study. The pharmaceutical company Moderna showed somewhat better efficiency for their vaccine that can be transported at higher temperatures, which makes distribution easier. The expectation is now that these vaccine candidates will receive an emergency approval from the FDA and EMA in order to start vaccination relatively soon.
In Europe, the announced shutdowns have continued as planned and it has been a dark autumn in terms of virus spread. ECB chief Lagarde continues to see major risks in the economy due to increased restrictions and spread of the virus. The ECB guides for continued monetary stimulus if deemed necessary. In addition, Germany has announced a need to double its borrowing, compared to previous forecast, to EUR 180 billion in the coming year to slow down the effects of the virus and the shutdowns.
Figures on GDP development in the euro area for the third quarter showed that GDP fell by 4.4 percent compared to same quarter 2019 but rose by 12.6 percent compared with the second quarter. The same figures for the Sweden showed a slightly better picture with a negative growth of 2.5 percent compared with the third quarter of 2019 and an increase of 4.9 percent compared with the second quarter of 2020.
As expected, the Swedish Riksbank left the repo rate unchanged, but announced that its intention to increase its quantitative easing by SEK 200 billion and will continue the asset purchases until the end of next year. In addition to previously announced asset classes, this will also include green government and municipal bonds. Furthermore, the central bank announced that from January 2021, sustainability will also be taken into account when purchasing corporate bonds, the issuers must comply with "international norms and standards for sustainability", in order to meet the criteria.
The European and Nordic credit markets showed declining credit spreads during the month. Like the equity markets, the credit markets were positively affected by the outcome of the US election and positive news about potential Corona vaccines. Stibor 3-month continued its declining trend and was noted at - 0.11 percent at the end of the month. The ten-year government bonds showed slightly rising levels during the month.
Portfolio Manager of Coeli Nordic Corporate Bond Fund
Senior Analyst
| Inception Date | 2014-06-18 |
| Management Fee | 0.5 % |
| Performance Fee | N/A |
| Risk category | 3 of 7 |
DISCLAIMER. The information provided here does not constitute professional financial advice. Past performance is not a guarantee of future returns. The price of the investment may go up or down and an investor may not get back the amount originally invested. The key investor information document (KIID) and prospectus are available at www.coeli.se.