Portfolio Manager comment Coeli Likviditetsstrategi April 2019
Likviditetsstrategi advanced with 0.17 percent during April. Since year-end, the NAV per share has consequently increased by 0.58 percent. The Nordic corporate bond market remained strong in April with generally falling credit spreads. Continued inflows into corporate bond funds and increased risk appetite among investors provided support to both the secondary market and the new issues launched during the month.
The largest contributor in April was Samhällsbyggnadsbolaget i Norden, whose bonds appreciated sharply after the company received official investment grade ratings from Fitch and S&P. During the month, Samhällsbyggnadsbolaget carried out several transactions that enabled the upgrade: a major sale of an office property, extensions of capital and fixed interest periods and issues of both new ordinary shares and deeply subordinated bonds.
A handsome return contribution also came from Telia. The company’s quarterly report was in line with expectations and contained data on slightly falling revenues and profits, but with a stronger cash flow. The property company Kungsleden also belonged to the major contributors. The company’s report for the first quarter shows that the loan-to-value ratio now is a bit below 50 percent, an important metric for the company to be able to achieve an improved rating.
In principle, all holdings contributed positively to the result for the month. The exception was new investment B2 Holding, which was revalued slightly lower and thus had a minor negative contribution.
During the month, the fund participated in a new issue of deeply subordinated bonds from Länsförsäkringar Bank; in addition, exposure to the Norwegian credit management company B2 Holding was added. The two new holdings are considered to offer good return opportunities and increase the average yield in the portfolio; as well, the companies’ operations show relatively low cyclical sensitivity. The fund also actively traded in bonds from the Samhällsbyggnadsbolaget and increased its exposure to the company through investments in the company’s green bonds, maturing in 2024. Ahlsell left the portfolio as a result of the company’s bonds being redeemed as a consequens delisting from the stock exchange.
At the beginning of the month, the International Monetary Fund (IMF) lowered its global economic growth forecast for 2019 to the lowest level since the financial crisis. The IMF’s forecast now stands at 3,3 percent for the global economy, down 0.2 percentage points from the previous estimate in January. IMF communicates that the two biggest risks to the global economy are, not unexpectedly, the UK’s exit from the EU and the trade conflict between the United States and China. Growth forecasts were also lowered for the EMU area to 1.3 percent for 2019, a decrease of 0.3 percentage points. However, the forecast for the Chinese economy was raised by 0.1 percentage point to 6.3 percent for the full year. From a Swedish perspective, the figures were slightly revised, Swedish GDP is now forecasted to grow by 1.2 percent in 2019, a reduction of 1 percentage point from the previous forecast in January.
From a central bank perspective, April was a relatively quiet month without any unexpected communication. The ECB reiterated the mantra with their willingness to keep interest rates at current levels as long as necessary to achieve a 2 percent inflation rate. As expected, The Swedish Riksbank kept the interest rate at -0.25 percent. The biggest news from the board was the decision to purchase government bonds for a nominal value of SEK 45 billion combined with communication that future rate hikes will happen in a somewhat slower pace than previously communicated. The board also repeated its intention to raise interest rates by the end of 2019 or beginning of 2020.
The Nordic and European credit markets continued to be strong with falling credit spreads during the month. Stibor 3-month, which exceeded 0 percent in March for the first time since 2015, fell back during the month and ended at -0.06 percent. Long-term government bonds showed a somewhat negative trend during the month with rising interest rates. The yield on the German, Norwegian, UK and US 10-year bonds all rose between 7-15 basis points with the Swedish 10-year bond as the exception where the yield fell by 3 basis points.
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
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.