Kraft Nordic Bonds delivered very strong returns in 2025, despite a year characterised by other types of challenges. The contrast has been clear between the strong development in the credit markets and an unclear macro and geopolitical picture. Trade conflicts, energy security, electoral risk and regional tensions characterised the news picture. Nonetheless, the credit market acted as if these factors were secondary, driven by ongoing returns, good liquidity and an increasingly predictable interest rate picture, as well as solid fundamentals. As last year, the biggest contributors were property, banking, finance and insurance.
2025 was a particularly active year in the Nordic region (NOK 284bn), Europe (EUR 102bn) and the US (USD 375bn). This illustrates the deep liquidity and appetite for risk in the markets. Despite this, December was a relatively quiet month, with the fund only participating in a new issue in Biffa, the UK's largest waste and recycling company. Beyond this, there were only minor changes to existing positions such as Aroundtown, Ardagh and CPI.
The market has been constructive, with compression in credit spreads across the credit spectrum. Going into 2026, we expect fundamentals to become more important for returns. We will therefore continue a disciplined investment process with clear selection and risk management.
We believe 2026 could be another good year, driven by more idiosyncratic differences and strong technical factors. The market will probably appear more selective, with increasing differences between good and bad credits. It is within these conditions that we can find value and attractive risk-adjusted returns. The effective interest rates in the markets are still attractive, but decisions will be characterised by credit-specific assessments and relative pricing where the market will reward management skills rather than being lifted by a strong market.
The portfolio is solid and consists of liquid loans with attractive effective interest rates. The main focus going forward is to maintain capital discipline, price risk correctly and ensure good liquidity in the portfolio.
At the end of the month, the fund had a current interest rate of 7.58 %* and an effective interest rate of 11.09 %.*
*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.
Sincerely yours,
Øivind Thorstensen & Simen Aarsland Øgreid
