Monthly report June 2021 – HYOF

NAV at the end of June stood at 102.26, up 0.71 points. We are just behind the forecast for the half year due to a weak first month. We hope to make up for it in the next few months, right now it looks like that.

We want 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 that 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 they can envisage 2 possible rate hikes in 2023 contributed to this.

However, the prices of HY bonds have not been affected to a particularly 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 in pairs.

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

We have done some rebalancing in the portfolio after a holding was redeemed early, which was a good deal for the fund. We have slightly increased our exposure 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 31 July and you can subscribe as usual through Avanza, among others. See the website for more information about it.