Sustainability is the objective of the Catella Sverige Aktiv Hållbarhet fund, which actively seeks to identify companies where sustainability is embedded in the business concept.
Turnover is higher in active management than in traditional equity funds and the fund aims to deliver return that exceeds its benchmark over time. Investments are selected for the fund through a combination of financial and sustainability analysis. The investment process is based on the conviction that there is a connection between a sustainable business model and persistent profitability and growth over the long term, and that this is often underestimated by the market. Having a sustainable business model involves providing products and services that offer solutions to global environment, social and corporate governance challenges. The fund’s choice of companies is also limited by negative criteria, meaning that the fund does not invest in companies that violate any of the ten principles of the UN Global Compact. The fund is also permitted to invest in derivatives as an aspect of the investment strategy.
There is an obvious glass-half-empty mood right now, and we believe that volatility will persist for some time to come.
Fund manager comment
There is an obvious glass-half-empty mood right now, and we believe that volatility will persist for some time to come. A changed narrative on growth and cost inflation in the third-quarter corporate reports has led us to reduce short-cyclical positions, and instead offset with a greater proportion of banking, a relatively high cash position and a high proportion of telecom operators. Company numbers for the fourth quarter will soon start to come in. Expectations have not been lowered in line with the market, which increases the risk that results will fall short, while forward-looking comments are cautious. However, it is important to remember that geopolitical events, risk appetite and thus stock prices can turn quickly, making it more important than ever to be vigilant about changes in sentiment.
A more conciliatory tone between the US and China failed to calm investors. The market fell heavily in the wake of an increasingly messy Brexit, interest rate hikes and more and more signs that underlying demand is sagging. The tension has been raised significantly in the United States. The debacle between Trump and Fed boss Jerome Powell escalated after the latest interest rate hike, and Trump planned to shut down the government in the new year if he failed to obtain financing for the wall with Mexico. In all, this led to a 6% percent fall in the Swedish stock market in December, while Catella Sverige Aktiv Hållbarhet fell 7.6%.
The positions in the industrial sector and consumer durables have hampered fund performance. The share prices of industrial companies Tomra and Volvo fell further than the market during the period, as did industrial-related technology company Hexagon and car safety companies Veoneer and Autoliv. We have upped the cash reserves, which provided some resilience, as did Telia and care company Ambea.
The month was relatively quiet on the news front, aside from HM's reported sales numbers. HM's numbers met a negative reception despite fulfilling market expectations, as there were fears that the sales were made at the cost of major discounting and a lower gross margin.
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.
Catella Sverige Aktiv Hållbarhet offers a concentrated portfolio of carefully selected Swedish shares, which means the potential to obtain better returns than the index. The fund invests with a focus on large and medium-sized businesses.
The fund is permitted to use derivatives and the net asset value of the fund may fluctuate considerably. The fund is intended for investors seeking active management of Swedish equities and with an investment horizon of at least five to seven years.