Monthly Commentary - Pareto ESG Global Corporate Bond
Many professional investors, especially several hedge funds, believe the retail herd who has wreaked havoc in several short positions in names like Gamestop and AMC is not reasonable. Information is shared and transmitted to millions of people in less than a second. Retail trading platforms like Robinhood has used this to gather huge momentum from large groups of investors. This phenomenon and an underlying anti-establishment theme have changed many aspects of our society and now it was the professional investor's turn. Apart from these high-flying stocks, the market is grappling with a prolonged pandemic and an emerging protectionism regarding the vaccine roll-out.
The credit market has seen a large number of issuers in both Europe and the US issuing bonds during January. Secondary trading levels have remained constructive but cautious. Spreads have widened somewhat in both synthetic indices and in certain segments of the cash bond market, like travel.
The fund had another month of positive return. It participated in new issues of Verisure and LR Global Health. Verisure was an existing position to which the fund added.
LR Health Global is a health and beauty company working with direct sales and digital channels. The company presents a firm commitment to sustainability initiatives by improving its business operations in order to reduce its environmental impact. We will evaluate this over time to see the true metrics of an otherwise fairly ambitious sustainability agenda.
In the secondary market we picked up bonds in Ericsson, Profine,Energizer, Labco, Zayo, Iron Montain and Iqvia.
Looking ahead, we believe that the greater part of the total return in fixed income will come from coupons and carry and a smaller share from price movements. A well-diversified, sustainable corporate bond fund is well positioned for 2021.
Synthetic CDS credit indices widened during month of January. The iTraxx Crossover index went from +242 bp at the end of December to +269 bp at the end of January.
Portfolio management team:
Philip Lindgren
Portfolio manager
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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.