Kraft Nordic Bonds delivered a good month, despite the volatility in the Nordic market. The largest contributors to the return came from the real estate, banking, finance and insurance sectors. The credit premium increased by about 25 basis points, driven by some risk aversion. Activity in the primary market remained high, with NOK 29 billion in new issues in October. So far this year, issues have been made for NOK 252 billion. The Nordic high yield market still appears fundamentally stable, but is characterized by investors becoming more and more selective.
After a period of geopolitical turmoil related to the trade war, the US and China have entered into a temporary “truce” with reciprocal tariff cuts. The fund has not been exposed to this risk to a large extent, as the overweight is in real estate, banking, finance and insurance – sectors that have been among the strongest in Nordic high-yield so far this year. The sectors are characterised by continued attractive yields, stable earnings, low cyclical risk and broad indirect diversification.
The fund did not participate in any new issues in October, but the activity took place in the secondary market, where portfolio adjustments were made to existing positions. The fund raised its exposure to Aroundtown SA and CPI Property Group, two well-run real estate companies.
The main focus going forward is to maintain capital discipline, price risk correctly and ensure good liquidity in the portfolio.
At the end of the month, the fund has a current interest rate of 7.26%* and an effective interest rate of 11.00%.*
*Forcosts related to management. Will be subject to change from day to day, and is therefore no guarantee of the return in the period for which it is calculated.
Sincerely
Øivind Thorstensen & Simen Aarsland Øgreid
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