The fund posted a return of -8.17% in October and is down -6.18% over the past 12 months.

October was a challenging month for the Nordic high-yield market, marking its first negative month since March. The macroeconomic picture was once again dominated by geopolitics and volatility in the energy market. Brent crude rose from around $99 to around $118 per barrel during the month, fueling inflation fears among investors, particularly in Europe. Both the U.S. and European central banks kept their policy rates unchanged, but both are leaving the door open for further hikes. In addition, the political crisis in France caused turmoil, and the risk premium on French government debt relative to German debt rose to its highest level since 2011.

For the fund, real estate was the largest negative contributor. The proposal to transfer housing units from large landlords in Berlin to public ownership caused a decline in the prices of certain bonds, including those of Heimstaden AB. We have modeled a scenario in which the proposal becomes law, and even without compensation, Heimstaden AB’s assets would cover its bond debt approximately 2.5 times over. A bill could be introduced as early as 2028, and the federal government has decided to block such measures at the state level. Based on available information, we assess the likelihood that the real estate transfer will be carried out as limited. Outside the real estate sector, Virgin Media O2 dragged the index down. Read the article about Heimstaden on our website.

During the month, the fund participated in two bond offerings by Paramount Skydance, which were issued to finance the acquisition of Warner Bros. Discovery. The bonds pay an effective interest rate of approximately 9% in NOK, which we consider attractive given the underlying risk.

We have not changed our fundamental assessment of the companies in the portfolio, and the decline consists primarily of price movements in companies that are paying interest as usual. We will continue our strategy of investing in high-quality companies on attractive terms.

As of the end of the month, the fund has a current yield of 9.98%* and a yield to maturity of 13.14%*.

*Before costs 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 ThorstensenSimen Aarsland Øgreid