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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) detracted with 1.82% during February. Since year-end, the NAV per share has consequently increased by 1.01%. Expectations that the global economy would have strong resilience despite the rapidly and sharply rising interest rates took a hit in March when weaknesses in the banking system emerged. Although the problems surrounding the banks in the US and Europe differ, like inflation, it is a sign of the challenges created when central banks for a long period of time stimulate with low interest rates and then quickly hit the brakes.
In addition to the risk that similar situations may evolve due to speculations about which is the next weak bank, it is likely to affect banks' ability to take on risk and their lending capacity. Consequently, there may be tougher credit conditions for companies and households, which may hamper economic growth. As such, the market is now doing the work for central banks, which will therefore soften and no longer feel the need to continue with aggressive rate hikes.
As far as Europe is concerned, the takeover of Credit Suisse created turbulence in the credit market when Swiss authorities decided that the bank's AT1 securities would be written down to zero. The fact that debt owners would take larger losses than shareholders created great uncertainty about the order of priority in other jurisdictions outside Switzerland. The European Central Bank and several banks therefore felt compelled to declare that the ordinary capital hierarchy still applies, and that Switzerland was therefore is to be considered as an exception. As a result, the decline in the At1s in Europe and the Nordic countries was short-lived and they are once again trading at the same levels as before the Swiss action.
The banking turbulence and uncertainty about economic growth resulted in rapidly falling market interest rates and rising credit spreads. The U.S. 2-year yield fell from over 5 percent to 4 percent in three days, the biggest drop since 1982. The market is now pricing in that the US Federal Reserve, after June, will have to cut interest rates by almost 100bp by the end of the year. Credit spreads in Europe widened from 350bp to over 450bp. In the Nordic region, there were broad price declines in several sectors, but especially in real estate bonds and in particular the more liquid hybrids issued in euros.
Overall, we believe that the Nordic market has so far been fairly balanced during the turbulence, which is probably due to satisfactory liquidity with relatively high cash positions in the fund system.
Among the month's major contributors was Dometic, manufacturer of refrigerators for mobile homes and boats, that announced a refinancing of large parts of their bank loans and that a new credit facility with Svensk Exportkredit had been obtained. Covered bonds also contributed positively as a result of falling market interest rates.
The negative impact on the month's results came mainly from real estate companies, where larger declines were noted for, among others, Balder and Samhällsbyggnadbolaget in the Nordics. The sector was pressured by concerns that the banks will be more restrictive with their lending as a result of the banking turmoil. Balder presented an offer to buy back all the company's outstanding bonds in Swedish kronor maturing in 2024 and 2025. SBB announced that during the quarter they had secured refinancing of just under SEK 12 billion, the amount exceeds by a wide margin the company's debt maturing in 2023.
During the month, the fund participated in new issues from the logistics company DFDS and the ship leasing company Ocean Yield. Both issues were at attractive levels with good compensation for the credit risk. During the month, the fund traded actively in AT1 bonds from Nordic banks, which helped to reduce the impact of the falling bond prices in the sector. The fund's holdings of bonds from Storskogen were increased after Moody's lowered the company's credit rating by one notch.
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.