It is difficult to write about economic forecasts or credit spreads when the people of Ukraine suffer through the dark effects of the war. However, what is happening in reaction to Russia's invasion into Ukraine is different from previous conflicts. Many countries are adopting and agreeing to fairly severe sanctions against Russia. The sanctions will affect companies, countries and economic prospects outside of Russia, especially in the short term. From a global perspective, Russia mostly affects the energy sector. We now see that the equity and credit markets have stabilised in the last days of February and liquidity has improved. The USD is becoming a strong refuge and has strengthened against most currencies.
The fund fell in February when political turmoil drove credit spreads apart. The quarterly reports released in February have been generally strong.
We believe that Europe will be affected, especially in the energy sector where several European countries import natural gas from Russia. The USA does not have the same connection or geographical proximity and we see that American high-yield names have strengthened in recent days. The fund has continued to be overweight sectors such as the health sector, renewable energy.
The new issue market has been hesitant during the turbulence that reflected the month of February. Until the day Russia entered Ukraine, global investment grade was active. The fund was only active in the secondary market, where we scaled down several positions to meet redemptions and maintain the fund's characteristics.
The fund is classified as an Article 9 fund according to the SFDR regulation.
The synthetic CDS credit index widened during February. The iTraxx Crossover index went from +287bp at the end of January to +334bp at the end of February.
Portfolio management team:
Philip Lindgren
Portfolio manager
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