January was an active month in the Nordic High Yield market despite a somewhat hesitant start. The markets took somewhat longer to get going, which may be due to several reasons. There were mainly volatile interest rate movements linked to various macro figures, while there was also some excitement about the inauguration of President Trump and the consequences that will follow, such as a potential trade war. Although January was an active month with relatively good performance, the markets seemed neutral and balanced during the period. The trend from last year has continued into the new year, but it is observed that transactions are perhaps being made at too low credit spreads, so many more issues have traded weakly in the secondary market. Even though the spreads were lower, there are still good returns to be had, mainly driven by high base rates.
The fund was active during the period and participated in the issue from Scorpio Tankers. The loan was set at an attractive fixed rate, 7.5 %. Although the company is a cyclical company, it is worth noting that the company is virtually debt-free, with great financial flexibility and low breakeven costs for operating the fleet. This will immunise the company should rates come under pressure. We also made some portfolio adjustments, increasing positions in companies such as Thames Water Utilities and Aroundtown Securities BV.
The fund has good exposure to the property sector and we expect this sector to be a major contributor in 2025. The companies to which the fund has exposure are what we consider to be the best companies in the Nordic region and Europe when evaluating operational and financial performance, combined with a low level of corporate debt. The sector has also been little affected by the market turmoil we observed at times in January and we consider the exposure to be a "safe haven" asset class with attractive effective interest rates, which we as a conservative manager value.
The portfolio is solid and consists of liquid loans. We will continue to exercise capital discipline and follow our strategy, focusing on what we consider to be the best risk-adjusted investment opportunities. We see 2025 as an exciting and attractive year to own fixed income securities.
At the end of the month, the fund has a current interest coupon of 7.57 %* and an effective interest rate of 12.86 %.*
*FExcess costs related to management. May change from day to day and is therefore no guarantee of the return in the period for which it is calculated.
