Monthly Commentary - Pareto Global Corporate Bond
There are many who are looking for an America which can move forward in greater unity. Biden and Trump do not hitchhike across America, but they fly intensively to important states during the last days of campaign before the presidential election on November 3. We and everyone else outside the United States probably want this election to be over with and produce a clear winner. Political uncertainty and the drastic spread of Covid-19 became too much for the market during the last week of October.
That being said, most of the companies globally have adjusted their cost base and their business methods, which has yielded results. We see this in most Q3 reports that have come for the holdings in the fund. Developments in sustainability continue strongly. The EU Sure Social Bond programme will issue up to EUR 100 billion over the next few years. The first issue that came in October was the most oversubscribed bond issue ever. The interest rate was 0% for 10 years, reflecting the world we live in now. The fund did not participate, but there have been a few other interesting new issues in the market that fit the fund's profile.
One new issue the fund participated in was Getlink, one of the few high yield Green Bond issues to come. The fund has owned bonds in the company for some time and it was interesting to see the company extend the financing. The company works with a collaboration between England and France to transport both people and materials in the tunnel in a sustainable way, but also to balance the energy supply and grid system between the countries. In these Brexit times, this example provides a welcome relief in terms of working towards a better future together.
The fund wants to invest in companies which find concrete sustainable solutions here and now for challenges we have, where Getlink is a very good example.
After a strong performance in the fund and slightly stretched valuations, the fund was a net seller during the month of October in order to reduce the risk somewhat and increase the cash part of the fund. The fund dropped towards the end when the market weakened, but October was still a month with a positive return above the monthly average.
We have avoided increasing in vulnerable Covid-19 sectors and maintain a carefully balanced and diversified exposure with a strong focus on sustainability.
Synthetic CDS credit indices widened during month of September. The iTraxx Crossover index went from +355 bp at the end of September to +369 bp at the end of October.
Portfolio management team:
Philip Lindgren
Portfolio manager
Read our latest monthly reports
Pareto Global Corporate Bond
Pareto Nordic Corporate Bond
Pareto Nordic Cross Credit
Pareto Global
Pareto Aksje Norge
Pareto Nordic Equity
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.