Despite the summer lull, August was an exceptional month for Kraft Nordic Bonds. The fund participated in a new issue in LifeFit. The company is a German fitness chain that is experiencing strong growth and is positioned to establish itself as a leading player in the German fitness centre market. The issue was made at an attractive 3M EURIBOR + 7%, in line with our investment strategy.
In addition, the fund made several strategic adjustments to the portfolio. The Julius Baer bond was called in August, we bought this loan in 2023 at 18% effective interest rate and was sold at 6% effective interest rate. The fund also increased its positions in CPI Property Group, Thames Water and Banco Santander, all of which represent attractive risk-adjusted return opportunities.
Several sectors contributed to the fund's return this month, with the property sector being by far the biggest contributor. Both in the Nordics and Europe, the sector has experienced a strong rebound as a result of strong quarterly results, stabilisation of property prices and, not least, expectations of lower interest rates. Several issues were completed in the market, including by Heimstaden Bostad, which raised capital at STIBOR +2.4%. Such capital raising shows that the best companies still have good access to the capital market, which will continue to contribute to the recovery of this sector.
Most central banks, with the exception of Norges Bank, are unanimous that there will be interest rate cuts during the autumn. The expectation of interest rate cuts is supported by macroeconomic data showing that inflation is declining and the pressure on the economy is easing. Geopolitical risk will continue to be a factor in the coming months, in addition to the upcoming US election. The fund has a solid and liquid portfolio, which makes us well equipped to handle any volatility in the market.
The effective interest rate in Kraft Nordic Bonds (class B) is 13.88 % (before management costs). The effective interest rate may change from day to day and is therefore no guarantee of the return in the period for which it is calculated. The price-weighted coupon (interest coupon adjusted for the price of the bond) in Kraft Nordic Bonds is 8.40 % (before management costs).
