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.
Only a small number of purchases and sales of corporate bonds were made in order to enhance diversification of the fund.
Thomas Elofsson, 2018-11-30
Fund manager comment
The US Federal Reserve is likely to continue to raise its policy rates, but the increasingly flat yield curve, the difference between shorter and longer maturities, indicates that monetary policy is already relatively tight. An inverted yield curve, higher interest rates for shorter maturities over longer ones, has historically meant a recession with about a 12-month warning. We are not there yet, but caution is called for. The so-called portfolio channel of rising asset prices has been an important stimulus for both companies and households ever since the recession of 2009. Falling asset prices would at present be a worrying sign for the economy. The threat of a trade war has clearly had an adverse impact on the market, and even if a “solution” means higher tariffs, this could be welcomed by the market as uncertainty is something that impacts both consumption and investment decisions.
The net asset value of the fund decreased by 0.41% in November, while stock markets and market interest rates continued downward. The fund’s interest rate risk was kept unchanged during the period and the duration was 3.5 at the end of the month. The fund’s investments in corporate credit saw negative performance this month, and equity market hedges were unable to offset this. Only a small number of purchases and sales of corporate bonds were made in order to enhance diversification of the fund.
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.
