Monthly Commentary - Pareto ESG Global Corporate Bond
A large part of the world’s market participants waited nervously for US Federal Reserve Chairman Jerome Powell’s speech in Jackson Hole at the end of August. The message was perhaps both expected and feared, but it still hurts a little to see the reality we have to deal with right now. We have high inflation and problems with volatile electricity prices in Europe. We can all use a little inspiration from one of the greats in sports, Mohammed Ali; there will be solutions, but the road getting us there will be a challenging.
The market continued its strong trend from July through the first part of August, whereupon it was more or less back to square one as the month ended. Credit spreads ended the month higher and interest rates rose after inflation figures in the US and Europe remained high.
In the credit market, new issue volumes remained low in August in high yield, but investment grade volumes were strong in both the US and Europe.
What we mentioned last month regarding spread distinction between worse companies and better companies has started to happen now. We believe that idiosyncratic risk will increase in the future when certain companies and sectors will face greater challenges.
Inflow into Pareto ESG Global Corporate Bond and part of the cash that was in the fund was used to increase Wesco, Verisure, Techem and TDC Net. A new Sustainability-Linked-Bond was added through the secondary market, which was Seche Environment, a French company operating in the recycling and waste management sector in Europe.
Pareto ESG Global Corporate Bond was also involved in the new issue for Solenis.
The fund’s performance fell back slightly during the month, by approximately 0.4% to 0.6% depending on the currency share class. The Bloomberg global corporate investment grade index fell 3% and the Bloomberg global high yield index fell just over 1% during the month.
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 widened during August. The iTraxx Crossover index went from +512bp at the end of July to +588bp at the end of August.
Portfolio management team:
Philip Lindgren
Portfolio manager
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