Dear customer,
There has been a lot of market turmoil recently, and this has intensified in recent days. That's why we think it's a good idea to give you a little update on how we view the turmoil, and how we always work to manage our customers' capital in the best possible way.
The stock market has corrected sharply downwards and is likely to remain under pressure until there is a better overview of how the trade war will develop. It is challenging for the market to price in anything, as the situation around tariffs changes daily.
The fixed income market weakened somewhat in March and into April. This market could also be under pressure, but significant differences come into play here.
Kraft Høyrente, Kraft Nordics and Kraft Investment Grade all have around 80 % exposure to robust sectors such as property, banking, finance and insurance. We have around 10 % exposure to shipping, oil services, E&P and cyclical sectors - which now account for the largest rally in the fixed income market. None of the funds have exposure to sectors that are directly exposed to tariffs and trade restrictions.
It's important to note the difference between the fixed income and equity markets. As a lender, you are protected by legally binding agreements between the lender and the borrower. These documents define conditions such as maturity, interest rate and a number of financial requirements that the borrower must fulfil. This makes fixed income funds significantly more predictable, with lower volatility and a more stable income stream in the form of interest payments. Should the worst happen - such as a bankruptcy - creditors have the right to claim collateral through their rights.
As we have seen over the past six years, our funds have navigated very well in demanding markets. We have always managed to protect the principal while delivering returns. We will do so again. It is precisely in such market conditions that new opportunities arise - and we will do our best to seize them. We are monitoring the situation closely and, if we find it necessary, we will provide new updates in the time to come.
Sincerely yours,
Øivind Thorstensen and Simen André Øgreid Aarsland
Portfolio managers in Kraft Fondene
