Clear sustainability goals for new holdings
Market activity got going in August. Long-term interest rates continued to fall, and the weak economy does not suggest that rates will receive support from central banks.
Most are communicating a softer tone, and we can probably expect cuts or unchanged rates. It remains to be seen if the Riksbank will continue on its path, with hikes around year-end indicated. The macro turmoil continues to revolve around the familiar issues of the trade war and Brexit.
A number of changes were made this month, and we invested in some new companies. In the power sector, we have Kraftringen and Norwegian municipality-owned BKK. BKK is engaged mainly in hydropower production and distribution, and is the fifth-largest producer in Norway. BKK was the first in Norway to issue green bonds in the Norwegian market. Kraftringen has a diversified business and clear sustainability goals. From April 2018 all its own production is fossil free.
In real estate, we have invested in SBB and Wihlborgs. Wihlborgs focuses on offices and retail in the Öresund region, and SBB has Nordic exposure and a focus on community properties and housing. We participated in a primary transaction in Wihlborgs, with a 3-year bond that gives us STIBOR +125 basis points. The primary transaction market got going this month and we also participated in Norwegian Sparebank 1’s 5-year bond issue.
Other new names include Länsförsäkringar Bank and Coor. Coor is a market-leading facility management company and we now own a 4.5-year bond. Our new holdings have helped the fund to greater diversification, both sectorally and geographically.
Despite macro and economic turmoil, the market continues along. Demand is still strong with investors, and credit margins decreased further in August. Carnegie Investment Grade rose 0.08% in August.
Carnegie Investment Grade focuses on Nordic corporate bonds with high credit ratings. The low interest rate environment of course poses a challenge, but strong and stable companies with a sustainability focus are an attractive combination, and we see potential to achieve a good return over time.