Monthly Commentary
Pareto Global Corporate Bond
We are probably not quite there, but the financial markets have acted on all the support measures that have come into place. The Federal Reserve has bought just over $3 billion in investment grade (IG) and high yield (HY) ETFs. The positive spillover effect from the leadership at the Fed has spread to both Europe and to some extent the Nordic region. Both equities and credits have performed very well during month of May. Corporates in both IG and HY have issued large volumes. The issue volumes in May were one of the best in a long time in both EUR and USD.
The fund's return during the month of May continued the strong trend we saw in April. Many companies released Q1 2020 reports and provided information on the current situation. Q2 will be significantly affected in a negative way, and this message is clearly presented in most reports. What we also see is that banks, governments and central banks do provide major support and this support provides a great deal of security for many companies. We also observe that the majority of the companies in the fund have managed the downturn well and in some cases very well. Some companies have even been strengthened since their business produces critical materials for healthcare organizations and hospitals around the world.
One sector that has continued to be very challenging is the aerospace industry, where restructuring and bankruptcies will continue. Just recently LATAM filed for Chapter 11 protection. The fund has no exposure to the aerospace industry and continues to be underweight cyclical companies in the consumer cyclical industry.
The trend in the market strengthened towards the end of the month, which bodes well for the future. We see that many companies with a strong ESG profile have in many cases performed well in this challenging environment. In addition, market liquidity has strengthened considerably and many of our quality companies traded up a great deal during the month.
The fund participated in several new issues during May, Encompass Health, Digiplex, Eurofins, and Synlab / Labco. Davita took in $1 750 million in a 10-year issue at a very favorable level from the company's standpoint. We chose to keep the holdings in Davita five-year bonds we previously owned instead of going out along the curve.
Synthetic CDS credit indices performed really well during month of May. The iTraxx Crossover index went from +490 bp at the end of April to +429 bp at the end of May.
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's return in May continued the strong trend we saw in April. The majority of the companies in the fund have managed the downturn well and in some cases very well.
Pareto Nordic Corporate Bond
The positive sentiment we saw in April continued in May and the fund recuperated more of the losses experienced in March.
Pareto Global
May was a strong month relative to the market for Pareto Global. A good number of quarterly figures exceeding market expectations contributed well to this development.
Pareto Aksje Norge
Since its nadir in March, the Norwegian stock market has appreciated by approximately 1/4. Is the appreciation justified? The short answer: yes, of course!
Pareto Nordic Equity
It was a good month for the fund in absolute and relative terms. The stock market seems to be looking past the troubled economy in 2020 and is focusing on a more normal 2021.
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.