Strong reports and increased holdings
The holiday lethargy continued to be reflected in market activity during early August, which combined with good risk appetite and strong fund flows to provide support for further rises in asset prices in the hunt for returns.
At the same time, the world’s stock exchanges continued to alternate between euphoria and despair as Trump played poker with trading relationships, Boris Johnson dismissed the British Parliament and more and more economic signals pointed south. Despite the unrest, companies are generally posting decent results. On the other hand, many are saying it is increasingly difficult to predict the future given the trade war and Brexit, because conditions are constantly changing.
The shortage of new issues, a strong M&A market and dovish central banks continue to drive the risk sentiment to new highs. As the primary market slowly got going, the companies that did not issue ahead of the summer took the opportunity to raise money.
During August we participated in issues including Ocean Yield. Furthermore, the half-year company reports led to a higher level of activity in the secondary market, where we increased our holdings in Tulip Oil, Zengun and Axactor on the basis of strong reports. In addition, we slightly reduced our holdings in Oriflame, Stillfront and Slättö Fastpartner given the rise in their bond prices.
With a fashion for buyups, we waved goodbye this summer to a number of names and hope going forward to add another to the list of companies seeking early redemptions – Scan Global. This company has grown out of its capital structure and announced that it intends to refinance this autumn, which may be a nice upside to a basically stable company.
The fund’s performance this month came largely from underlying coupons, although some companies have stood out on both the upside and the downside.