Despite several dramatic events around the world, the financial market has remained fairly calm. Geopolitical tensions have not affected the markets this time around. A major event that was a focal point was the annual Jackson Hole Symposium The rise of the delta variant forced the Kansas City Federal Reserve, which hosts the annual conference, to change its plans on short notice and hold a virtual event. The message given was of continued support, but also that the economies have surprised positively during the recovery.
"The pace of the recovery has exceeded expectations, with output surpassing its previous peak after only four quarters, less than half the time required following the Great Recession," Powell said.
We still see this in the half-yearly reports that came in during August. There is a broad resurgence for most companies in several sectors. In this favourable economic climate, we had a surprisingly strong new issue market in both the USA and Europe. August is otherwise a subdued period usually affected by the summer holiday. Credit spreads globally widened in the first half of August but ended the month strongly in both Europe and the US.
The fund had a good month with a positive return and high activity in both the primary and secondary markets. Several new names were added to the portfolio, such as First Student, Oeyfjellet Wind Investments and Wesco.
First Student is a niche company in school transport. Acquirer EQT Infrastructure is committed to helping future proof the Company by investing in the electrification of its fleet and accelerating its transition to renewable fuel sources in order to support passenger health and reduce environmental impact. Vehicles will be electrified over time and contribute to a healthier environment in the future.
In the secondary market, we added in Commscope, Liberty Mutual, Davita, Organon, IQVIA, Cerba Healthcare and Intrum.
A couple of companies in the fund have either been bought or are repaying bonds. MDC Partners has been bought out and thus the bonds owned by the fund were repaid. MDC Partners has had a challenging period the past few years and will now look to improve the company's profitability with a new partner. We wish them good luck.
Synthetic CDS credit indices continued to trade in a tight range during the month. The iTraxx Crossover index went from +235 bp at the end of July to +229 bp at the end of August.
Portfolio management team:
Stefan Ericson
Lead portfolio manager / Branch manager Stockholm
Philip Lindgren
Credit analyst
Ingrid Johanne Nygaard
ESG analyst
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