At the same time as Kraft Nordic Bonds is launched, it is now three years since the launch of our first high-yield fund, Kraft Høyrente.
In this three-year period, the world has been characterised by the corona pandemic, geopolitical escalation, war, inflation - and not least extremely volatile markets. That's why we're proud that Kraft Høyrente has delivered an annualised return of 6.65%, corresponding to a total return of 21.65%. During this period, the fund has been very active in its management, utilising market fluctuations to create the best possible risk-adjusted return for unitholders.
Kraft Nordic Bonds will be managed with the same philosophy and strategy that has always underpinned the management of Kraft Høyrente. This means that the managers focus on quality companies with low credit risk, established business models, solid capital structures and visibility when it comes to cash flows. As is well known, high-yield funds work by the manager lending money to companies by buying corporate bonds. In a fixed income fund, there are two things that determine the return: What interest rate the companies pay on the bonds, and whether the value of the bonds goes up or down.
Two complementary high-yield funds
Since the strategy and philosophy are the same, the launch of Kraft Nordic Bonds will help create a product that is very complimentary to Kraft Høyrente. Kraft Nordic Bonds will focus on owning a cross-section of Nordic credit, while Kraft Høyrente will continue to own mainly Norwegian credit. This means that Kraft Nordic will be manoeuvring in a significantly larger market, which has both different characteristics and, not least, a larger selection of quality companies. In addition, there are structural differences in the mandate, which will help the funds to complement each other in a good way.
Good timing
There is currently a high effective interest rate in Nordic credit, so the timing for the launch of Kraft Nordic Bonds could be very good.
Figures from the Norwegian Mutual Fund Association show that high-yield funds were by far the most popular fund category in July. More than half of Norwegians' investments in July were placed in high-yield funds. In a historical perspective, for example over rolling five-year periods, the return on high-yield funds has not been much lower than in the stock market.
Philosophy and strategy
- Based on Kraft Fondene's philosophy and strategy
- Main focus: Credit risk and mitigation of other forms of risk
- Quality companies (strong balance sheet, solid cash flow, experienced management, market leaders, good track record)
Nordic countries
- Stable political and economic conditions
- Good sector distribution in the Nordic countries
- Higher credit risk premium in the Nordics than Europe/US for similar risk
- Geographical proximity and cultural understanding
Structure:
- Attractive geographical and sector diversification.
- Can actively reduce risk via insurance contracts
- Broad mandate with the possibility of holding several types of credit (convertible, hybrid, subordinated bonds)
- Differences in structure mean that Kraft Nordic Bonds and Kraft Høyrente complement each other
