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 fund’s exposure to corporate credits explains the strong development.
Fund manager comment
The fund rose in the benign environment by +1,4 % in August. The fund's exposure to corporate credits explains the strong development. The fund's duration amounted to 1,5 years at month end. The fund's performance was impacted negatively by hedges, primarily equity index put options. In general, only smaller adjustments were made in the portfolio during the month.
The risk sentiment during the month was positive and was driven primarily by a sharp rise in technology related shares. The financial markets were driven by continued monetary and fiscal stimulus, societies that are opening up with a gradual recovery for the economy. Our opinion is that the risk for setback is large, but in the end, we expect central banks to win the battle.
During the month the US central bank signalled that the tolerance to higher inflation is high and that lower unemployment and stronger growth now is the main focus for the monetary policy. Given that monetary policy during the last decade has had difficulties in achieving the inflation target, one need to ask oneself if a higher inflation target has any practical meaning.
As long as central banks continue asset purchases and de facto buy more bonds than what are being issued, our picture is that corporate credits will continue to find themselves in a benign environment. The main threats in the near term is the geopolitical development with the US elections during the autumn, together with bubble tendencies in parts of the asset markets. In the longer term the economic development is decisive, and one should pay attention to that fiscal policy is not sustainable in the long term, but what is needed is both stronger growth and higher inflation. The crucial question for financial markets is then how central banks act if growth and inflation surprise on the upside.
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.
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.