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Underlying yield: 15 percent

The initial fall in prices was similar across the board, but pricing in April increasingly reflected underlying operations and the impact of Covid-19. That said, there are still big differences between sectors/risk appetite, and fund flows remain central to daily price sentiment.

Norwegian sectors took a double whammy, from Covid and the oil price crash, while defensive/European traded names have had some rebound. In practice, the Q1 reports are irrelevant – outlooks are qualified guesses and the real test will come once the Q2/Q3 reports reflect the real impact on companies’ operations.

We have kept our focus on maintaining a liquid portfolio and adequate cash in order to meet fund flows and seize interesting opportunities. The current yield of 15 percent is attractive and should cope with some challenges, but the key is long-term resilience regardless of short-term movements. The uncertainty means that volatility is high, and we have to look further into the future in order to assess the ability of different companies to endure.

Given the previous price discrepancy, we have increased our holdings in companies we strongly believe will cope with this crisis. Jacob Holm has had a tough period, with an unfavourable price/mix, but is now starting to enjoy lower input prices while demand for its products is increasing.

In our view, Verisure fell much too far given its strong business model. EG7 (Toadman) also fell to levels that made the bond seem attractive, especially at a time when the business is benefitting from social restrictions. These were financed through reduced holdings in B2, Selecta and Transcom, and Chembulk’s decision to redeem parts of its bond at a make-whole price of 105 percent.

The performance of the fund is still being influenced by risk appetite, which is in turn affected by flows. The fund rose 3 percent in April, taking this year’s return to -15.4 percent.

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