Portfolio Manager comment Coeli Nordic Corporate Bond Fund R-SEK April 2021

Nordic Corporate Bond Fund (Class R) advanced during April with 0.61 percent. Since year-end, the NAV per share has consequently increased by 2.67 percent. April was another positive month for risky assets, strongest development was seen in the US while European markets were slightly weaker for both equities and credits. The strong development slowed down during the last two weeks when the focus shifted from expectations of further fiscal stimulus in the US to that the stimulus also is to be financed through increased taxes.

The largest contributor was the payment service company Convene, which primarily is active in the health sector in Norway and Sweden. The company has been pressured by reductions in permitted debt collection fees in Norway, which is expected to lead to lower revenues and deteriorating profitability in parts of the business. The company has made cost savings and launched a number of growth initiatives to compensate for the loss of revenue. During the month, Convene released preliminary figures for the first quarter that were generally better than expected, at the same time the company repeated its forecast for operating profit, which in the current years is expected to be slightly lower than 2020.

The credit management companies Intrum and B2 Holding made a positive contribution during the month. Intrum reported for the first quarter sales that were in line with and operating profit that was slightly better than expectations. The collections on owned debt portfolios exceeded previous forecasts and the company guides that portfolio acquisitions are currently taking place at attractive levels. Good investment opportunities are of course positive, but from a credit perspective, Intrum must also deliver on the promised reduction in indebtedness during the current year.

The ship leasing companies Ocean Yield and SFL Corporation (formerly Ship Finance) were also found high on the list of positive contributors this month. During the month, SFL issued a sustainability-linked bond where the proceeds will be used for investments in new tonnage with alternative fuel sources with significantly lower emissions.

Additional support to the result came from the Danish PWT Group, where the fund during the month finally received delivery of new bonds after the restructuring that the company underwent during the summer of 2020.

During the month, the fund participated in the above-mentioned new issue from SFL Corporation, and an additional investment was made in bonds from Convene. In addition, the holding of subordinated bonds from the real estate company Balder was increased.

Bonds from Golar LNG Partners were redeemed early during the month and were repaid at nominal amount after the company was acquired by New Fortress Energy.

During the month, the US Federal Reserve (Fed) left the target interest rate unchanged in the range of 0.0 – 0.25 percent. The Fed also announces that it will continue with support purchases of $ 120 billion a month. The economic recovery is still said to be far from complete and the concern the market has previously expressed about rising inflation is said to be of a temporary nature, hence the Fed’s unwillingness to slow down the monetary stimulus. Unemployment figures for March showed a continued economic recovery as unemployment fell to 6.0 percent and employment rose by 900,000 during the month. These figures were significantly better than market expectations of 650,000 new people in employment.

The European Central Bank also left interest rates and asset purchases unchanged during the month. Eurostat’s report on the inflation rate in the euro area showed an annual rate of 1.3 percent in March, which was in line with analysts’ expectations. EU reports show that most EU countries will have enough vaccines to vaccinate a majority of the population by the end of June. This is significantly earlier than the EU’s official target of 70 percent by the end of the summer. On the climate front, EU countries have now also agreed to reduce carbon dioxide emissions by 55 percent by 2030 compared to 1990, the previous target was a 40 percent reduction.

Like the ECB and the Fed, the Swedish Riksbank left the target interest rate unchanged at 0 percent. The Riksbank also indicated that further purchases of SEK 2 billion in the corporate bond market will take place during the third quarter. During the month, the National Institute of Economic Research published an updated analysis in which they revised GDP growth to 3.7 percent in 2021 from the previous 3.2 percent. Underlying this is the vaccination that is expected to support household consumption during the second and third quarters.

The European and Nordic credit markets showed slightly declining credit spreads during the month in both the high-yield and the investment-grade segments. Stibor 3-months was noted at -0.03 percent. The Swedish ten-year government bond was quoted at the end of the month to 0.41 percent and has thus risen 3 basis points during the month. The US ten-year government bond was quoted at 1.65 percent the end of the month.