Nordic Corporate Bond Fund (Class R) advanced during December with 0.96 percent. Since year-end, the NAV per share has consequently increased by 0.01 percent. Equities and corporate bonds ended the year positively with minor gains in December, expectations of continued stimulus, regarding both monetary and fiscal policy, and the launch of vaccinations against Covid-19 supported sentiment.
Among the month's largest contributors was SBB i Norden, whose bonds developed strongly after the company issued relatively large volumes of Eurobonds, both senior and subordinated hybrid bonds. SBB continued during the month with its high ambitions for expansion, partly by raising its bid for the Norwegian real estate company Entra, and partly by acquiring a majority stake in the smaller Swedish sector colleague Offentliga Hus.
The credit management company B2 Holding also developed strongly after the company completed a second repurchase of the company's bonds maturing in 2021. The repurchase is seen as an indication that the company is comfortable with the cash flow generated and that the investment rate is currently moderate, which should reduce indebtedness.
On the negative side was mainly the industrial service company Quant, whose bonds declined after the company reported that they had lost a maintenance contract for a mine in Chile. The company has reported declining sales in recent quarters and has not fully succeeded in replacing expired / terminated contracts with new business. The challenging conditions can be partly attributed to the restrictions due to Covid-19, which may be reduced later in the year. Mortgage bonds also declined marginally due to slightly higher market interest rates.
During the month, the fund participated in a new share issue from Norwegian Protector Forsikring. The holding of bonds from Intrum maturing in 2024 was exchanged for bonds with a one-year maturity. In addition, the holding of bonds from Mercell Holding was increased.
2020 ends with an eventful month with Brexit, a new fiscal stimulus package in the US and continued reporting on Covid-19 dominated the news flow. During the month, the first Covid-19 vaccine received an emergency approval. At the same time as vaccination has started in most countries, there are reports of a mutation in the virus, with new cases discovered in the UK and the US.
In the US, President Trump signed a stimulus package, which also prevented a government shutdown. The stimulus package includes checks of USD 600 to be distributed to each citizen as well as increased unemployment benefits. The cash grant may be increased to USD 2,000, which is supported by both the President and the Democratic majority in the House of Representatives. Joe Biden has indicated that he wants to see an even greater stimulus after he takes office. Focus is now on the two Senate re-elections in Georgia where Democrats need to win both seats to get a majority in the Senate and thereby obtain an easier path to reforms and additional stimulus packages.
As expected, the US Federal Reserve (FED) left the key interest rate unchanged and pointed out that the Fed will continue its purchasing program in at least current rate until substantial progress has been made towards the central bank's target. Employment increased in the United States by 245,000 in November, which was significantly lower than the expected 469,000. This was the fifth month in a row with a slowing in the momentum increase in employment.
Apart from Covid-19, the main topic in Europe was whether there would be an agreement in the Brexit negotiations as the deadline approached. Just in time for Christmas, the long-awaited agreement was finally reached. The UK gave the EU access to its fishing water for a limited time while the EU agreed that disputes would not be decided in the European Court of Justice. However, the agreement is not formally approved as each individual EU country must pass the agreement in their respective parliament.
In Sweden, the government tightened its restrictions across the country due to the increased spread of infection in the country. Swedish trade has released statistics for November which showed a decrease in sales of almost 30 percent for the clothing retail compared with the same month in 2019. It should be added that these figures include e-commerce, which are worrying figures for physical trade. The restrictions seem to have made sales in physical stores almost disappear.
The European and Nordic credit markets showed slightly declining credit spreads during the month. Stibor 3-month was quoted at -0.05 percent at the end of the month.
Portfolio Manager of Coeli Nordic Corporate Bond Fund
Senior Analyst
| Inception Date | 2014-06-18 |
| Management Fee | 0.5 % |
| Performance Fee | N/A |
| Risk category | 3 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.