Monthly Commentary - Pareto ESG Global Corporate Bond
Bye bye LIBOR … June 30, 2023, is the historic day when the USD LIBOR panel ends. Most LIBOR-based loan contracts have been transferred to SOFR (Secured Overnight Financing Rate) as a base. The decision to retire LIBOR, which was taken a couple of years ago, does not have any significant market impact. It is still an important symbolic event.
Inflation is falling slightly. It continues to be a challenge and concern. Inflation is still a major focus for central banks and society in general. This is clearly visible in the market’s positive reactions when important data regarding inflation show a lower inflation rate than expected. Although inflation shows clear signs of falling from high levels, it is still at too high of a level according to many central bank governors. US Federal Reserve Chairman Jerome Powell mentioned exactly that in a speech on June 29 in Madrid, stating that there will probably be at least two more interest rate hikes in 2023.
The fund’s development was stable during the month of June, in line with the carry return for the fund. The companies that report or provide updates regarding their business outlook give a similar picture. We have a slowing economy and companies work more with the balance sheet than with strong expansion.
The fund did not participate in any new issues during the month.
There was a positive net inflow into the fund, and we increased in Cerba Healthcare and EQT SLB.
The interest rate increases that we mention here mean that fixed income products are now more attractive than they have been for a very long time.
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 tightened. The iTraxx Crossover index went from +432 bp at the end of May to +402 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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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.