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 fund that offers corporate bonds issued in the Nordic region. The fund is able to perform in both rising and falling interest-rate markets.
Catella Corporate Bond Flex is a fund whose objective is to deliver competitive risk-adjusted return. The fund invests in Nordic corporate bonds, both investment grade and high yield, and government bonds. The fund applies negative screening for sustainability criteria and we consequently avoid long positions in companies that produce tobacco, alcohol, commercial games for money, pornography, coal, oil or weapons. Derivatives are used in management to protect fund capital. Over time, the fund's returns will co-vary with the Nordic corporate bond market. 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. Composition of the fund reflects Catella's outlook on the conditions for generating return in relation to risk in respect of credit and interest rate risk.
All in all, we still believe that the return potential is greater for higher-risk investments, and that more creditworthy investment grade companies have weaker prospects of generating returns in the coming year.
Thomas Elofsson, 2019-12-31
Fund manager comment
The Swedish Riksbank raised its repo rate in December, as expected, thus consigning negative interest to the history books. In our assessment, the bar for returning to negative policy rates is now very high. In a time of both weakening economic activity and inflation, asset purchases are now the Riksbank’s main tool for monetary stimulus. One consequence of this is that pricing in the fixed income market is far too aggressive, and we expect bonds with maturities over 2 years will need to be re-priced, resulting in higher interest rates.
We believe that 2020 may be the year when fiscal policy is shifted in a direction that entails more stimulus, and this applies to both Sweden and the rest of Europe. The United States holds presidential elections this year, and a one likely scenario is that there will be a contest for which of the candidates can promise the most fiscal stimulus. Larger budget deficits will lead to a greater supply of government bonds and, at a time when central banks are already buying a large part of the net supply of bonds, this realistically ought to lead to long-term interest rates being pushed upwards. An improved economy usually leads to a lower likelihood of defaults on corporate bonds, resulting in narrower credit spreads. Countering this, the higher interest rates that ought to follow from a stronger economy 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 higher-risk investments, and that more creditworthy investment grade companies have weaker prospects of generating returns in the coming year. That said, there are risks and we do not believe this is a time to be too adventurous with risk-taking. Consequently, we intend to continue to strive for a well-diversified portfolio with a relatively short maturity in our credit investments and to continue to seek opportunities to be low or negative interest rate risk in order to generate returns in a situation of rising market interest rates.
The net asset value of the fund rose marginally in December. The fund’s credit exposure was the main explanation for this month’s positive outcome, but interest rate risk exposure also made a positive contribution. The fund’s interest rate risk was reduced this month and the duration at the end of the period was -1.4 years. Otherwise, only minor adjustments were made to the portfolio.
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. Category 1 does not mean that the fund is risk free. The fund may over time move towards the left or right of the scale. This is because the indicator is based on historical data which is not a guarantee of future risk and reward. For information about the risk classification of each fund, please refer to the fund’s key investor information document.
Fact
Catella Nordic Corporate Bond Flex is an actively managed alternative fixed-income fund that is able to perform in both rising and falling interest-rate markets. The fund has a flexible toolkit, which means that it can easily allocate between different fixed-income asset classes.
Unlike traditional fixed-income funds, Catella Corporate Bond Flex has the potential to parry rising interest rates.
The fund is permitted to use derivatives and to have a larger percentage of the fund invested in bonds and other debt instruments issued by individual central government and municipal authorities and within the EEA than other securities funds.
The fund is suitable for investors seeking a higher risk and the potential for higher returns than traditional fixed-income savings.
Catella Nordic Corporate Bond Flex is a daily-traded alternative UCITS fixed-income fund registered in Luxembourg. Minimum investment: 100SEK/€10
