Monthly Commentary - Pareto ESG Global Corporate Bond
It also appears at the time of writing that yet another major regional bank in the US, First Republic Bank, will have to be bailed out or sold to other banks.
Despite these dark clouds, the volatility index VIX is down to a year-to-date low of around 16. The credit index iTraxx stabilised during the month, which provided support to an increased new issue volume for global corporate bonds. The flows helped support the market, with the US seeing inflows of nearly $8 billion into high yield funds in April.
What we see as still looming and likely to worsen is the deteriorating sentiment for commercial real estate in both the US and Europe. Tightened financial requirements for loans and pressure on interest coverage ratios will weigh on this sector for some time to come. Working from home is changing the landscape for office districts.
The fund had a positive return this month as well. We participated in two new issues during the month. These were Gruenenthal 6.75% and Loxam 6.375% Sustainability Linked Bond (SLB).
We would like to reiterate that the drastically increasing (from an investor’s point of view) coupons, compared to what we saw just 12 months ago, contribute to the fund’s continued attractive performance.
ESG and sustainability continue to be a forceful theme. The fund published its annual sustainability report in April.
The strategy going forward remains having a strong focus on companies that contribute with sustainable solutions here and now.
The fund is classified as an article 9 fund under the SFDR Disclosure Regulation.
The synthetic CDS credit index was basically unchanged in April. The iTraxx Crossover index went from +440 bp at the end of March to +440 bp at the end of April.
Portfolio management team:
Stefan Ericson
Lead portfolio manager / Branch manager Stockholm
Philip Lindgren
Credit analyst
Ingrid Johanne Nygaard
ESG analyst
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.