Brazil has bounced back

February was a rather eventful month for credit, particularly in selected sectors. The Carnegie Emerging Markets Corporate Bond fund strengthened in the second half of February, and ended the month virtually unchanged.

In addition to a stabilisation of oil prices, the focus was on the financial sector, with several large global banks publishing weak earnings reports. For credit, this led to large movements in subordinated capital, which fell relatively sharply in early February and then recovered in the second half of the month.

Overall, we saw signs of increased risk appetite towards the end of February, and corporate bonds in emerging markets also then preformed strongly. Several of the markets that started the year weakly, such as Brazil, recovered and we also noted a positive trend for commodity-related credits.

During the month, we added a few names to the portfolio, including Mexican food producer Gruma, which produces corn flour and tortillas. This company has performed well in recent years, while its debt has decreased, and it is today a global player with operations in Mexico, the US and several European countries.

Another company that we now have exposure to is Tata Motors/Jaguar Land Rover, which is also has relatively low debt. Since Tata Motors acquired Jaguar Land Rover, it now has an attractive range of models that reaches out to large parts of the world.

If we look at the portfolio as a whole, the recovery in Latin America has been the most obvious positive contributor to fund performance this month. We retain a good balance between investment grade and high yield, with a duration of 2.2 years. Despite some volatility during the month, the portfolio as a whole rose in February by 0.09 percent. We remain comfortable with our portfolio, and we see good prospects of positive performance.

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