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.
We do not think this is a situation when one should be too risk tolerant. Consequently, we intend to continue to strive for a well-diversified portfolio with relatively short maturities in our credit investments and to continue to seek opportunities to be low or negative in interest rate risk in order to be able to generate returns in a situation when market rates go up.
Thomas Elofsson, 2019-11-30
Fund manager comment
November was a relatively quiet month for interest-bearing assets. Swedish rates rose slightly during the month due to the anticipated Riksbank hike in December. Market expectations that global growth will improve next year, combined with continued monetary stimulus from the major central banks, led to positive risk sentiment during the month and good development for corporate bonds. The Swedish krona strengthened in November.
We believe that 2020 may be the year when policy is shifted in a direction that entails more fiscal stimulus, in both Sweden and the rest of Europe. The United States will hold presidential elections, and a likely scenario is that there will be a contest for which of the candidates can promise the most fiscal stimulus. Big budget deficits will lead to a greater supply of government bonds and, in a situation where central banks are already buying a large part of the net supply of bonds, this is likely to lead to upward pressure on long-term interest rates. A better economy usually leads to a lower probability of payment defaults on corporate bonds, resulting in lower credit spreads. Against this, higher interest rates, which should follow from stronger business activity, risk putting upward pressure on credit spreads from today’s historically low levels. All in all, we still believe that the return potential is greater for riskier investments, and that more creditworthy companies, known as investment grade, have lower prospects of generating returns next year. That said, there is no shortage of risk.
We do not think this is a situation when one should be too risk tolerant. Consequently, we intend to continue to strive for a well-diversified portfolio with relatively short maturities in our credit investments and to continue to seek opportunities to be low or negative in interest rate risk in order to be able to generate returns in a situation when market rates go up.
The fund rose 0.62 % in November. The fund’s credit exposure was the main explanation for the month’s positive outcome, but interest rate exposure also contributed to the return. The fund’s interest rate risk was increased during the month and the duration was -0.4 years at the end of the period. We took a position for a stronger Swedish krona, which has so far been successful.
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.
