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.
An actively managed fixed-income fund with a focus on corporate bonds issued in the Nordic countries. With its broad mandate, the fund has a bigger toolbox to better adapt to different market scenarios. The fund invests across the entire fixed-income capital spectrum.
The fund invests mainly in Nordic fixed income securities. 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, or weapons. Derivatives are used in management to protect fund capital and increase return opportunities. The fund is expected, over time, to have low co-variation with the equity market and may thus both raise the expected return and lower the expected risk in a traditional equity and fixed income fund portfolio. In structuring the portfolio, strong emphasis is placed on spreading risk and preventing any individual holding or sector from having excessive influence on fund performance. Investments are based on fundamental analysis of individual companies and traditional macroanalysis. The risk level will vary depending on Catella’s assessment of prevailing market conditions. The fund’s target is to generate annual return of 3-5 % with a standard deviation of 5% over time.
Concerns intensified in world financial markets during February as reported cases of coronavirus rose outside China.
Thomas Elofsson, 2020-02-29
Fund manager comment
The fund fell by 0.51% in February. Behind the weak performance was our overly optimistic view of the economy. Both the fund’s credit exposure and its interest rate risk exposure reduced the return. Although we continue to believe that interest rates are too low and the likelihood of fiscal policy measures is substantial, the fund’s short-term interest rate risk was closed and the duration at the end of the month was 1.5 years. The fund’s credit exposure did not change significantly during the month.
Concerns intensified in world financial markets during February as reported cases of coronavirus rose outside China. The big question now is not whether growth will be weaker in the coming months, but how big the impact will be on companies' cash flows. We believe the financial markets are now largely pricing assets on the estimated probability of recession. If we look at the movements in the market, fixed income is furthest ahead in its assessment of the likelihood of a recession, much of which is driven by the US where expectations of interest rate cuts to 0.5 % during the year are high. In Europe and Sweden, the main monetary policy response will probably not be lower policy rates but increased asset purchases. We are fast approaching a situation where the ability of monetary policy to stimulate the economy is small, and the policy response then available is fiscal. Given that the United States will have presidential elections this autumn, tax cuts should come in the near future to support economic development. Fiscal policy in combination with asset purchases is likely to be a powerful combination, but not without risk. The generally high indebtedness in the world economy is sensitive to higher interest rates, which is something that the financial markets are currently unable to cope with.
Our belief is that as long as confidence in central banks remains high, there is support for the market. That said, the current situation is difficult to assess and depends on how the coronavirus spreads.
Fund facts
Risk Indicator
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 or the highest permitted risk for the fund. Category 1 does not imply that the fund is risk-free. Over time, the Fund’s risk indicator may change both upwards and downwards. This is because the indicator is based on historical data for the Fund’s model portfolio, which is not a guarantee of future risk/reward.
Fact
Catella Credit Opportunity is designed to meet a challenging interest-rate environment and to be better able to adapt to different market scenarios.
The fund is an absolute return special fund and has a focus on fixed-income securities. The fund has a broad investment mandate, which allows investments across the entire fixed-income capital spectrum. At least 50 percent of the fund's assets are invested in Nordic holdings.
The fund invests predominantly in owned bonds, convertible debentures, preference shares and cash management. The fund's independence of any benchmark allows for business-based and flexible decisions. The fund uses derivatives both opportunistically and to protect its capital against the two primary risks, interest-rate risk and credit risk.
The fund is a further development of the successful and award-winning Catella Nordic Corporate Bond Flex fund. The new fund has an even broader management mandate and takes more risk in its investments, but also has greater potential to make use of derivatives for protection.
