The month's return was primarily driven by coupon income, as bond prices within the portfolio saw limited movement.
The managers noted that the market continues to be met by speculative issuers with high leverage and weak covenants seeking financing. However, the fund reportedly maintains a disciplined approach, preferring to forgo high coupons if the risk compensation is deemed insufficient.
One example is Bluewater, where the fund has long held exposure to a secured bond. When the oil services company refinanced the loan in May, the fund chose not to participate. The new bond was unsecured and, according to management, carried a coupon that did not reflect the corporate risk. Additionally, a lower order book and increased costs related to a production unit being moved from the Middle East to Asia were highlighted as risk factors.
Capital was instead deployed in the secondary market, where better risk-adjusted opportunities are identified. During the month, the fund purchased Intrum bonds maturing in 2028 at a price of 97 and a spread of just over 500 basis points.
In early May, Intrum announced a fully guaranteed rights issue of SEK 7 billion. Of this, SEK 5 billion will be used to reduce debt, while the remainder will finance growth. The manager believes the new leadership is taking clear steps toward a more sustainable balance sheet and continued deleveraging.
The Intrum bonds rose following the announcement but are still considered attractive at the short end of the curve. Here, the managers highlight both the running coupon and the potential for capital appreciation if the company chooses to refinance early, which is deemed possible as early as this autumn following the capital raise.
At month-end, the fund's duration stood at 1.0 year, with an average maturity of 2.3 years. The fund's yield was 4.3 percent, with a credit spread of approximately 300 basis points.
The portfolio is described as conservative, with good liquidity through cash and liquid investment-grade bonds. This provides the flexibility to act if new opportunities arise, while certain existing positions are judged to have continued revaluation potential.
The fund's three largest holdings were Entra, Kistefos, and Danske Bank, with portfolio weights of 5.2, 4.2, and 4.1 percent, respectively.
The largest sector exposures were to energy and finance, at 34 and 22 percent, respectively.
| Sissener Corporate Bond RF SEK, % | May, 2024 |
| Fund MTD, percentage change | 0.38 |
| Fund YTD, percentage change | 3.73 |
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