Monthly Commentary
Pareto Global Corporate Bond
The shock over the extent of Covid-19's impact on society is slowly turning into hope. We are waiting for the day when society will be fully opened. That day is not here, unfortunately, and the unimaginable impact is now visible in the economic data we observe. We can write several columns about all of the record negative figures in unemployment and GDP data, but we can summarize the situation as extremely serious. Support programs around the world look to counter the drastic decline in the global economy. Mankind has endured worse situations throughout our history and the financial markets reflect this optimism of gradual improvement and future normalization.
The fund's return in April was one of the best ever. The defensive nature of the fund contributed to the recovery being so strong. At the risk of repeating ourselves, we want to once again emphasize the strategy of the fund. Pareto Global Corporate Bond primarily invests in global high yield of a defensive nature, with no positions in cyclical sectors such as in oil, airlines, and raw materials. A solid ESG profile and a forward-looking strategy with our portfolio companies will contribute to sustainable operations today and in the future.
In corporate bonds, the market has gained momentum globally. April 2020 became one of the most active months in the last three years, with $37 billion in high yield issuance in the US alone. Large fund inflows have come in the US and Europe to both investment grade funds and also high yield funds.
The fund participated in a few new issues in April: Hannon Armstrong, Verisure and Stora Enso Green Bond. In the secondary market, we sold some of Vulcan, Sirius and Iron Mountain.
The quarterly reports have for obvious reasons been mixed, which is expected given the challenges in the world. However, several of our major holdings have reported positively, which is gratifying. A few companies that stand out with surprisingly positive reports among our core positions are UPM Kymmene, Ball Corp, Jacob Holm, European Energy, Davita, and Iron Mountain.
The yield to maturity is still historically high after the sell-off in March. In local currency the yield stands at around 7%.
Synthetic CDS credit indices rebounded well after the sell-off in March. The iTraxx Crossover index went from +601 bp at the end of March to +490 bp at the end of April.
Portfolio management team:
Philip Lindgren
Portfolio manager
Read our latest monthly reports
Pareto Global Corporate Bond
Pareto Global Corporate Bond's return in April was one of the best ever. The defensive nature of the fund contributed to the recovery being so strong.
Pareto Nordic Corporate Bond
In April we saw a clear change of sentiment in the Nordic credit market, with credit premiums tightening for most of the bonds in our portfolio. Consequently, the fund delivered strong returns for the month.
Pareto Global
April was a strong month in both absolute and relative terms. Many of the companies that fell the most in March experienced a solid rebound.
Pareto Aksje Norge
April ended up being the strongest month in almost a decade for the portfolio. An increase of approximately 12 per cent was also somewhat better than the market.
Pareto Nordic Equity
The fund rose more than the Nordic equity market in what turned out to be a strong month.
Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager’s skill, the fund’s risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments. This is marketing communication.