Investments in fund units are associated with risk. Past performance is no guarantee for future returns. The money invested in a fund can increase and decrease in value and it is not certain that you will get back the full amount invested. No consideration is given to inflation.
Catella Avkastningsfond is a fixed income fund whose target is to achieve stable return at low risk.
The fund invests in Nordic corporate and government bonds, with emphasis on investment grade corporate bonds. The fund applies negative screening for sustainability criteria and consequently avoids long positions in companies that produce tobacco, alcohol, commercial games for money, pornography, coal, oil or weapons. Derivatives are used in management to protect fund capital. Over time, the fund's returns will co-vary with the Nordic bond market. Investments are based on fundamental analysis of individual companies and traditional macroanalysis. Composition of the fund reflects Catella's outlook on the conditions for generating return in relation to risk in respect of credit and interest rate risk.
The fund’s interest rate risk was reduced during the month and the duration amounted to 1.3 years at the end of the period. Otherwise, only minor adjustments were made to the portfolio.
Fund manager comment
Market interest rates rose in the first half of September despite continued weak macro data. In the second half of the month, the negative surprises continued and interest rates tipped downward. Somewhat surprisingly, the Swedish Riksbank continued to signal its intention to raise policy rates either in December or early next year. The Swedish labour market has weakened sharply since the summer months and inflation is expected by most analysts to be closer to 1 % then to the central bank’s 2 % target. In a world of declining growth and inflation, it may seem the Riksbank is wrong in its ambition to raise the repo rate, but from an economic perspective it matters little whether rates are -0.25% or 0%, so a hike cannot be ruled out, although our best guess is that it will be postponed.
Ever more voices are clamouring that monetary policy in Europe has played out its role and that it is time for fiscal policy to take over. Given that politicians have so far been reluctant to increase budget deficits, the threshold to looser fiscal policy is relatively high. Eventually, though, it is highly likely that budget deficits will rise and that the supply of government bonds will increase. We are in a situation where significantly stronger or weaker growth will lead to higher market interest rates, while unchanged or falling market rates can only occur if growth and inflation remain sluggish.
The divergence in pricing of the likelihood of recession between different asset markets still seems far too great. The fixed income market suggests that growth and inflation will continue to weaken, while credit and equity markets deem this risk to be low. We anticipate that growth will continue to weaken this year. This calls for looser monetary policy or fiscal policy in order to avoid a repeat of the developments we saw at the end of last year for the equity and credit markets.
In the wake of rising market interest rates, the fund’s net asset value fell 0.34 % in September. Corporate bonds performed better and contributed positively to the outcome. The fund’s holdings in municipal bonds with low credit risk reduced the return. Holdings of put options in the stock market and our short position in the Swedish krona also made a negative contribution to the return this month. The environment of negative government bond yields in Europe continues to lead to inflows to credits. The fund’s interest rate risk was reduced during the month and the duration amounted to 1.3 years at the end of the period. Otherwise, only minor adjustments were made to the portfolio.
The risk and reward indicator illustrates the link between risk and potential returns from an investment in the fund. The indicator is based on how the fund’s value has changed over the past five years. Category 1 does not mean that the fund is risk free. The fund may over time move towards the left or right of the scale. This is because the indicator is based on historical data which is not a guarantee of future risk and reward. For information about the risk classification of each fund, please refer to the fund’s key investor information document.
Catella Avkastningsfond is an actively managed fixed-income fund which invests in corporate bonds with rating investment grade, high yield as well as non rated bonds. The fund may also invest in derivative instruments to, for example, protect the capital in the fund, and may use currency derivatives, such as through the purchase or sale of foreign currency on a forward basis, in order to hedge its holdings. It has a history dating back to 1999, with low risk, consistent returns and positive annual returns in every year. In short, existing investors in the fund have received good rewards for their risk.
The fund is suitable for investors seeking an actively managed fixed-income fund that invests in both the money market and the bond market.
The fund is permitted to use derivatives and to have a larger percentage of the fund invested in bonds and other debt instruments issued by individual central government and municipal authorities and within the EEA than other securities funds, in accordance with Chapter 5, Section 8 of the Swedish Securities Funds Act (SFS 2004:46).