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.
The favourable environment for interest-bearing assets led to a positive development of the portfolio in July. The fund’s holdings in corporate bonds were the main contributors to the portfolio’s return, but the fund also benefited from falling bond yields.
Thomas Elofsson, 2019-07-31
Fund manager comment
The trend of falling bond yields was supported during the period by continued weak macro data and increasing expectations of lower central bank interest rates. The reporting season can be said to have been mixed, with some estimate revisions on aggregate, leading to small declines in the stock market. The ever-lower market interest rates meant that corporate bonds developed well this month. The divergence between how different asset markets price the probability of recession therefore diminished somewhat during the month, but still appears too great. The fixed income market indicates that growth and inflation will continue to weaken, while credit and equity markets assess this risk as small. Interest rates are at their the lowest since the financial crisis, and our assessment is that the bond market is now fully priced for a recession and that economic data will have to continue to surprise on the downside for interest rate levels to fall further.
The favourable environment for interest-bearing assets led to a positive development of the portfolio in July. The fund's holdings in corporate bonds were the main contributors to the portfolio's return, but the fund also benefited from falling bond yields. The divergence between how different asset markets price the probability of recession is not sustainable in the long term. Our assessment is that the equity and credit markets are vulnerable to significantly weaker economic data. If there are positive economic signals, long-term bond yields will need to be adjusted upwards. The net asset value of the fund rose 0.88 % this month. The risk level in the fund is balanced and the cash position remains high. The fund's interest rate risk was reduced during the final days of the month, and the duration was 1.4 years at the end of the period.
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.
