Monthly Commentary - Pareto ESG Global Corporate Bond
One of the meetings was at Google, where Alfred Biehler, Head of Innovation, went through how Google views innovation and how AI can change and improve the future. Incredibly inspiring to listen to and the power of innovation is enormous. It is extremely useful to pause from time to time and reflect on how we can find new ways of working and analyze where development opportunities exist in companies we finance.
One area where AI can contribute in the future is sustainability data. There are big challenges now with data and deriving how different companies contribute or do not contribute to sustainability goals.
A continued robust global economy has resulted in many central banks talking about interest rates "higher for longer". This message is in unison for the largest economies in the Western world. However, it appears that we are very close to the plateau in the rate hike phase. The US 10-year yield rose from around 4.10% at the beginning of September to around 4.60% at the end of September. The global investment grade index fell more than the global high yield index. Credit spreads widened.
The issue market was very robust throughout the month in both Europe and the US. In the US alone, close to $24 billion in high yield was issued.
The fund participated in several new issues during the month, such as Rexel SA SLB, Williams Scotsman, Praemia Sustainable, Epiroc Green Bond, Mobico and Småkraft Green Bond. There is much to mention about all these companies, but what is most important for the fund and our shareholders is that we find investments broadly across many different sectors. Strong sustainable companies and broad sector diversification are the cornerstones of our portfolio management strategy.
The fund’s return was negative, in line with the global high yield index but better than the global investment grade index.
We did some trading in the secondary market, where among other things we decreased in PTC and Grupo Antolin, while we sold off the fund’s entire position in Commscope.
Yield levels in fixed income 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 widened. The iTraxx Crossover index went from +392 bp at the end of August to +434 bp at the end of September.
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.