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 0.57% during May. Since year-end, the NAV per share has consequently increased by 0.82%. The past month was characterized by marginally rising long-term interest rates, while credit spreads remained largely unchanged. The major macro theme was the discussions surrounding the U.S. debt ceiling, which took a significant step towards a solution at the end of the month.
With another reporting period behind us, we can conclude that companies, in general, are delivering better-than-expected or in line with the plan. At the same time, market participants are wondering when we will start to see declining growth figures and rising unemployment. The most evident effects of higher interest rates are seen primarily in the retail, construction, and real estate sectors, as well as in regional U.S. banks. In the case of Sweden, it is evident that consumers have been heavily affected, while industrial and manufacturing companies are holding up partially thanks to a very weak Swedish krona.
Real estate companies are on the defensive and are attempting to take credit-friendly measures through halted dividends, new share issues, and property sales. Rising interest rates and refinancing risks affect companies within the sector differently, depending on maturity structure, indebtedness, and interest coverage ratios. Different companies, therefore, have different capacities to act. This can be observed, for example, in the case of hybrid bonds. It has been market practice for companies to redeem their hybrids at the earliest opportunity, regardless of whether it was economically justifiable or not. However, during turbulent times, the risk increases that the bonds will not be repurchased but instead remain outstanding. That being said, it can still be a good investment at an attractive price as long as the company continues to pay interest on the instrument. Companies that have the ability will continue to redeem their hybrid bonds even in turbulent markets, as it sends a strong signal value to other creditors.
Among the month's major contributors was the education provider YA Holding after presenting a quarterly report that contained data on rising turnover and an improved operating result. The company has a tough period behind it with large losses in 2022 as a result of too few participants at several facilities. YA has now shut down several educations and reduced its cost base in other ways, the quarterly report shows that the company is on the right track, but the situation remains challenging.
Other positive contributors included Dometic, which exceeded the market's expectations with a report showing reduced sales and deteriorating profitability. Despite a wider product range and an increasingly large service business, the demand for several of Dometic's products remains strongly cyclical, a turnaround in the American recreational vehicle market, which is important to the company, is not expected until the second half of the year. With a strong market position and ongoing initiatives to strengthen profitability, the company is well equipped to await more favorable market conditions.
Negative contributions to the result came mainly from real estate companies where Balder and, in particular, Samhällsbyggnadsbolaget i Norden (SBB) fell in value. SBB came under renewed pressure after S&P lowered the company's credit rating at the beginning of the month. Thereby SBB lost its investment-grade status and is now again considered a high-yield issuer. This leads to reduced access to the capital markets and higher financing costs for the company in the future. After the downgrade, SBB's management's crisis awareness seems to have increased. The board proposed that the dividend be paused and a divestment of JM shares was carried out. In addition, a strategic review was announced to evaluate a sale of all or parts of the company or specific assets. The market's confidence in SBB has now hit rock bottom, the price collapse of the company's shares and hybrid bonds and the month's development of events show a very strained situation for the company.
During the month, the fund participated in an issue of subordinated bonds from the credit management company Hoist. Bonds from DistIT were divested and the exposure to the Ålandsbanken was reduced.
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.