Focus on the secondary market
The year started with a continuation of the previous year’s strong sentiment, but quickly soured with US-Iran military tensions and the Chinese coronavirus spreading globally.
Although the future is impossible to predict, there is a risk that the impact of the virus will become more extensive as measures like factory closures are implemented to halt the spread. As an immediate gauge of sentiment, global long-term interest rates widely fell during the month.
In spite of a globally weaker risk appetite, the local Nordic credit market has not been significantly affected and has continued strengthen, with falling credit margins reinforced by both fund inflows and a clear supply shortage. Declining credit margins have long been a theme, mainly affecting debt traded on the European credit market. But as usual, it is the development of underlying holdings that continues to have the greatest impact on fund performance, and this is likely to remain the case.
The number of small and attractive high yield issues in the primary market was somewhat limited in January, so inflows were mainly allocated in the secondary market to existing names like Catena Media, CentralNic and B2 Holding.
Catena Media has therefore climbed into the top-10 and is now the second-largest holding in the fund, and is also one of the names that contributed most to the month’s return following a sharp increase in its bond price. Our holdings in the debt purchasing sector continued to make a significant contribution to returns, while a few other names are still making a negative contribution. Melin Medical’ bonds were traded down at the end of the month following a new bill in Norway limiting fees for the collection of small claims.
Carnegie High Yield Select rose 0.95 percent in January.