Before making any final investment decisions, please read the prospectus, its Annual Report, and the KID of the relevant Sub-Fund here
Nordic Corporate Bond Fund (Class I) advanced with 2.19% during January. Since year end, long-term interest rates have continued to fall in line with lower inflation expectations in the US as well as signals of a slower pace of rate hikes from the FED. In Europe, inflation has proven to be more persistent, which means that the ECB has seen itself forced to continue at a high pace and with continued hawkish language.
The market is now pricing in that the US policy rate will peak just below 5 percent around the turn of the year, while Europe and Sweden are expected to peak around 3.50 percent.
The falling long-term interest rates during January resulted in rising risk appetite and falling credit spreads in both the US and Europe. In Europe, spreads on high yield currently amount to approx. 370bp and on investment grade to approx. 80bp. The level is slightly below the historical average, which indicates that the market currently assumes that a possible recession will be mild and manageable.
Risk appetite and balance in the corporate bond market have also improved in the Nordics. However, the challenges in the real estate sector mean a higher risk premium for Nordic companies in general and Swedish companies in particular. Our assessment is that Swedish companies with lower credit quality than investment grade have to pay around 1.5 - 2 percent more than their European counterparts, which creates satisfactory investment opportunities in this segment.
Among the month's biggest contributors was the property company Balder, whose bonds continued the positive trend after the new issue announcement in December. This even though the credit rating agency Moody's announced that they are continuing their review for a possible downgrade, a final announcement is expected after Balder reports its annual accounts.
Bonds from the credit management company Intrum also developed strongly, the company presented a quarterly report that was relatively neutral from a credit perspective. Intrum continues to collect on overdue receivables above budget and the portfolio investments are deemed to have been made with a higher expected return. At the same time, the dividend was left at an unchanged level, which makes the promised reduction of the company's leverage more difficult.
Bonds from Storskogen recovered part of the previous decline during January. Interest for the company increased after its management expressed confidence at an investor meeting that it will be able to handle upcoming bond maturities without problems.
Among the few companies that developed negatively one found Dometic, which traded weakly before and after the quarterly report. Dometic faced low demand in the quarter when several customer segments reduced their inventory, which negatively affected both turnover and profit margin. However, the cash flow was strong, and the company's indebtedness was almost unchanged compared to the previous quarter.
During the month, bonds with relatively short remaining maturities from Dometic and B2 Holding were exchanged for longer maturities. Both exchanges contributed to raising the yield rate in the portfolio. In addition, subordinated bonds from Ocean Yield were replaced with newly issued bonds from SFL Corp, both active within ship leasing.
Portfolio Manager of Coeli Nordic Corporate Bond Fund
Portfolio Manager of Coeli Nordic Corporate Bond Fund
| Inception Date | 2014-06-18 |
| Management Fee | 0.5 % |
| Performance Fee | N/A |
| Risk category | 3 of 7 |
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Before making any final investment decisions, please refer to the prospectus of Coeli SICAV I, its Annual Report, and the KID 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.