Portfolio Manager comment Coeli Nordic Corporate Bond Fund R-SEK September 2021
Nordic Corporate Bond Fund (Class R) advanced during September with 0.22 percent. Since year-end, the NAV per share has consequently increased by 4.70 percent. Risk appetite in the financial markets fell in September due to increased uncertainty about the strength of the global economy, which led to generally falling stock prices and moderately rising credit spreads. The corporate bond market was also pressured by rising government bond yields.
The largest contributor of the month was Bayport Finance, the company’s report for the second quarter showed stable income while credit losses improved slightly. In connection with the report, it was announced that the company aims to refinance its two bonds in the spring of 2022. Bonds from the credit management company Hoist Finance and the consumer lender 4Finance also developed well. The bond from Hoist has a first possible redemption during the first half of 2022, the current valuation is a bit below the nominal amount. With a short remaining expected maturity, a positive development is often obtained when the price moves towards par. 4Finance held investor meetings where the beginning of the third quarter was reported to have been good at a high pace in new lending. The investor meetings are seen as a preparation for a forthcoming refinancing of the company’s dollar bond.
Lakers Group, which was added to the portfolio in May, also performed well after presenting a quarterly report at the end of August with optimistic prospects for the second half of the year. Lakers is active in service and maintenance of pumps and pursues an active acquisition agenda aimed at consolidating the industry, a recent entry into the German market and a major acquisition in Norway was closed in August.
On the negative side one mainly found covered mortgage bonds, which fell marginally in value as a result of rising market interest rates. Bonds from Heimstaden AB also fell in value after its subsidiary Heimstaden Bostad announced a very large acquisition of residential properties containing almost 29,000 apartments. The transaction means that the company’s financial key figures weaken, mainly regarding an increased loan-to-value ratio. With the acquisition, Heimstaden Bostad establishes itself as one of Europe’s leading players in rental housing and the exposure to markets with rental regulation increases, which provides improved stability and predictability for the company’s earnings. Heimstaden AB received after the transaction was announced for the first time a public rating from Fitch which landed on BB +.
During the month, a new investment was made in a green bond from the real estate company Odd Molly (under name change to Logistea) which focuses on warehouses and logistics properties in southern and western Sweden. A couple of additional investments were made in bonds from NP3 Fastigheter and Crayon Group, among others. Patientsky left the portfolio as the company has not develop in line with expectations and the management team has been replaced.
The Federal Reserve (Fed) left the Funds Rate unchanged in the range of 0.0 – 0.25 percent, during this month’s FOMC meeting. As in the previous month, Fed communicated that a slowdown in asset purchases is approaching. The announcement of tapering is expected to come during the next FOMC meeting, given that inflation and employment targets continue to move in the right direction. The number of new employees increased by 235,000 in the US economy during the month, which was far below market expectations of 750,000. Unemployment fell by 0.2 percentage points compared to the previous month and now amounts to 5.2 percent.
China’s second-largest real estate developer Evergrande shook the global financial markets during the month when the company’s acute liquidity situation became clear. The rating agency Moody’s downgraded the company’s credit rating during the month with continued negative prospects. There are still unanswered questions how the company will be structured going forward so the story is likely to be continued.
As expected, the European Central Bank (ECB) left both the key interest rate and the purchase program unchanged. The ECB also adjusted inflation forecast for 2021 to 2.2 percent from previous 1.7 percent and 2022 to 1.7 from previous 1.5 percent.
From Swedish perspective came the good news that the Government, together with the public health authority, eased most of the corona restrictions at the end of the month, among them the participation ceiling for public and private gatherings was removed, and the advice of remote work was abolished. A big step on the way to a more normal everyday life in other words.
During the month, the European and Nordic credit markets showed widening credit spreads in both the high-yield segment and the investment-grade segment. Stibor 3-months was noted at -0.06 percent. The Swedish ten-year government bond was quoted at the end of the month at 0.38 percent and has thus increased by 21 basis points during the month. The US ten-year government bond was quoted at the end of the month at 1.52 percent, 22 basis points higher than at the end of the previous month.
Coeli Nordic Corporate Bond Fund R SEK
|Performance in Share Class Currency||1 Mth||YTD||3 yrs||Since incep|
|Coeli Nordic Corporate Bond Fund R SEK|
DISCLAIMER. This is a marketing communication.
Before making any final investment decisions, please refer to the prospectus of Coeli SICAV I, its Annual Report, and the KIID of the relevant Sub-Fund. Relevant information documents are available in English at coeli.com. A summary of investor rights will be available at https://coeli.com/regulatory-information-coeli-asset-management-ab/.
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.