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.
Although risk assets showed weak performance during the month, the portfolio was up in May.
Thomas Elofsson, 2019-05-31
Fund manager comment
Interest rates continued to decline during May in the wake of higher expectations for monetary policy stimulus in the US and Europe. The stock markets corrected in May, which also contributed to pushing down interest rates. There is now a large divergence between how different asset markets price the probability of recession. The fixed income market indicates that growth and inflation will continue to weaken, while credit and equity markets assess this risk as low. Although interest rates are by and large the lowest we have had since the financial crisis, our assessment is that the strong sentiment will persist so long as central banks do not signal less expansionary monetary policy, which probably requires stronger economic signals and higher expected inflation.
Although risk assets showed weak performance during the month, the portfolio was up in May. The main contributor to the positive development was the fund's holding in Securelink, which was acquired by telecom company Orange. Overall, credit risk was the main driver of this month's return, although interest rate risk also contributed to the positive outcome. The net asset value of the fund rose 0.38 % in May. The risk level in the fund is balanced and the cash position remains high. The duration of the fund was increased in May, and amounted to 2.88 at the end of the month.
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.
