Monthly Commentary
Pareto Global Corporate Bond
Madonna's controversial song Like A Prayer from just over 31 years ago remains highly relevant. Racial tensions and civil unrest escalated in cities across America, and major demonstrations followed globally. An increased focus on the diversity debate in the workplace followed. Several large companies such as Apple, Google, and Adidas donated money and increased targets for employment of minorities in the United States. ESG is integrated into the management of the fund and we believe that companies which succeed in navigating climate change, social issues and corporate governance will perform better over time.
Liquidity in the global credit market remains satisfactory, with strong support from most central bank programs and inflows into credit funds for just over 10 weeks since March. We are approaching a calmer period regarding new issuance and believe that the focus will shift to carry returns instead of price appreciation. The cost of hedging USD bonds to European currencies is now at a five-year low, which makes it very attractive for a European investor. We have steadily increased the share of USD bonds in the fund during the year.
The fund bought several bonds in the new issue market, Virgin Media, Deutsche Bank Green Bond, IQVIA, momox Green Bond and Profine GmbH.
Profine is an example of a company operating in an industry (windows and doors) that has historically used many environmentally hazardous chemicals. The company has not solved all sustainability issues, but they see their "greenline" principles as a step towards greater market share and higher sales. Environmental focus should be a "win – win"
The global credit market performed satisfactorily in June. The US IG and HY market slowed towards the end of the month and the European market was cautious. The Nordic market, which has not received the same extent of stimulus early on from central banks, developed well during the month.
The fund performed very well during a month which included several micro changes in sentiment. We have been very selective with the new issues we have participated in.
The new issue market for HY in the US can hit a monthly record of $50 billion in volume. Europe is still lagging in volumes, but is also in a significantly better situation regarding the coronavirus development than the US
In the secondary market, we sold some in Lowell.
Synthetic CDS credit indices performed well during month of June. The iTraxx Crossover index went from +429 bp at the end of May to +384 bp at the end of June.
Portfolio management team:
Stefan Ericson
Lead portfolio manager / Branch manager Stockholm
Philip Lindgren
Credit analyst
Ingrid Johanne Nygaard
ESG analyst
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Pareto Global Corporate Bond
The fund performed very well during a month which included several micro changes in sentiment. We have been very selective with the new issues we have participated in.
Pareto Nordic Corporate Bond
We are now moving into a period with substantial excess liquidity, driven by central banks' quantitative easing as well as practically zero or negative interest rates world-wide. This should set a scene where risk assets, including Pareto Nordic Corporate Bond, perform well.
Pareto Global
We used the market fall to invest in seven new quality companies, and we sold three where the stock price developed relatively strongly. Most new investments have developed better than the market.
Pareto Aksje Norge
The lockdown in Norway has had a positive impact on some of our companies. The largest positive contributor is KID Interiør, which has risen as much as 58 per cent since the turn of the year.
Pareto Nordic Equity
Many of our shares have come back strongly since March, and the last three months have been very good. However, there is still a bit of catching up to do.
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.