Monthly report June 2021 – HYOF

NAV at the end of June was 102.26, an increase of 0.71 points. We are just behind the forecast for the half year due to a weak first month. We hope to be able to make up for that in the coming months, that's what it looks like right now.

We would like to start by drawing your attention to a debate article Fi wrote during the month regarding liquidity in the bond market. Fi highlights the risks of funds that have daily redemption rights investing in illiquid corporate bonds.

We share the view that the bond market, and in particular the high-yield market, is illiquid. For this reason, we created the High Yield Opportunity Fund. HYOP is designed specifically to take advantage of the illiquid corporate bond market.

Read our full press release here: https://kreditfonden.se/den-illikvida-svenska-foretagsobligationsmarknaden-skapar-mojligheter-for-high-yield-opportunity-fund/

Expectations of increased inflation, as we mentioned in previous newsletters, have contributed to increased volatility in the bond market during the spring. The US Federal Reserve's statement during the month that it could consider 2 possible interest rate hikes in 2023 contributed to this.

However, the prices of HY bonds have not been affected to a very large extent by increased inflation expectations. We invest mostly in floating-rate notes with short maturities that are relatively illiquid. We may get a mark-to-market effect from price movements but the strategy is to hold to maturity and redeem at par.

Orderly inflation does not have to be negative for our issuers or their creditworthiness. On the contrary, it is a sign of economic growth and rising prices. Since the nominal amount of debt is fixed and earnings increase, the debt burden decreases in relative terms.

We have made some rebalancing in the portfolio after a holding was redeemed early, which was a good deal for the fund. We have increased exposure slightly to the financial sector.

We are fully invested but have a good pipeline of interesting bonds we want to invest in with the capital from the next issue.

The next issue is on July 31st and you can subscribe as usual through Avanza, among other things. See the website for more information about that.