Correction with opportunities

February was mostly characterised by continued good risk sentiment and new records on world stock exchanges. But the upturn came to an abrupt end when the market became aware of news that the coronavirus was rapidly starting to spread outside China.

The Nordic credit market generally fared better than its European counterparts, although performance was impacted by the negative sentiment. Concerns that global growth will fall sharply have led central banks to say they are ready for stimulus if necessary, and measures could include interest rate cuts and tax easing to help companies forced to stay closed as a result of the virus.

Market activity was high until the last week in February, and we were active in names including Heimstaden, Zengun and Catena Media. We also increased our holding in Chembulk. The company has repurchased bonds in the open market at higher prices than we bought at, and the hope is that they will redeem the bond within the coming year.

We have for some time now been placing greater focus on diversification of holdings and maturities to increase the liquidity of the portfolio. This means that we feel comfortable handling possible flows and have more room to act on interesting buying opportunities like lower bond prices. However, it is worth mentioning that things still look relatively expensive in many areas from a historical perspective, even if price correction offers attractive opportunities when allowed to be selective.

Despite the market turnaround, the fund held up relatively well and the month’s overall performance was -0.37 percent, taking to gain for the year to date to 0.51 percent.

The fund’s focus is to invest in companies that provide a high underlying return, and the performance of these companies is also the most important factor for long-term returns. In the short term, however, the fund is not immune to changes in market sentiment, as the advance of the coronavirus has shown. Therefore, we continue to focus on maintaining a diversified and liquid fund with companies that we believe have a long-term sustainable business concept.


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