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Portfolio Manager comment Coeli Frontier Markets Fixed Income May 2021

The fund delivered 1.56 percent performance in the I USD share class after fees. The month was mainly dominated by inflation and rising commodity price headlines. For a majority of the portfolio frontier countries this is a positive development on the exports side. The 10 year treasuries end the month at 1.60 percent versus 1.63 percent at the end of April, though we had volatility given a big negative surprise on the Non-Farm-Payroll numbers in the USA.

During the month we had the French president pushing for developed countries to provide further support for African economies by reallocating USD 100 billion special drawing to the benefit of African nations. At the same IMF has been busy in Africa with staff level agreements reached in Kenya, Senegal and Rwanda. Zambia, having defaulted last year, has also had discussions with the IMF but conclusion of these will likely need to wait until after elections in August. Zambia has also been beneficiary of rising copper prices.  Belarus surprised everyone by forcing an international flight to land in Minsk and capturing a journalist on board. This resulted in international condemnation and minor sanctions.  The fund benefitted from our ESG policy on excluding exposure to countries where active government officials are sanctioned by either the EU or UN. As a result of early sanctions against the president of Belarus we have not been invested.

We participated in two new issues, one was from the African Export-Import Bank and the other was our first green bond from the Pakistan Water and Power Development Authority, a government owned entity. As a quasi-sovereign, the Pakistani green bond issued at a 75 basis points premium to the 10 year sovereign bond.  We have also added positions to the portfolio in Rwanda and the Bahamas on the hard currency side and a short dated position in local currency exposure in Kazakhstan.

In May, all but 2 countries contributed positively to the returns. The highest contribution to performance came from our positions in Sri Lanka, Zambia and Ghana. In relative terms, Zambia contributed most to outperformance versus our benchmark and we lost in relative terms on our underweight in Kenya. The second best relative contributor to the portfolio was our underweight in Belarus.

The largest three investments in the fund are still Ghana, Sri Lanka & Nigeria, though we have increased our allocation to Ghana and taken some profit in Sri Lanka during the month.

Our current top down spread risk level is at 113 percent, which is a slight increase versus last month. We expect a number of countries in our space to issue new bonds over the coming months.  We anticipate additional positive headlines of support from developed countries to the benefit of frontier markets will continue to support the overall strong performance outlook for frontier fixed income.

Maciej Woznica

Portfolio Manager Coeli Frontier Markets Fixed Income

Fund Overview
Inception Date 2021-03-26 (2021-03-31- for the USD share class)
Management Fee (I USD/I EUR) = 0.75 % p.a.
Risk category 5 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.