Fund performance was positive during the quarter and the fund rose just over 1% in SEK. The outset of 2024 was marked by stronger economic data as well as an inflation that is moving slower than expected towards the central banks’ targets, particularly in the US. As a result, the market is pricing out a good portion of the aggressive expectations for rate cuts that was in the market at year-end. Despite this, global risk sentiment remained very positive and supported risk assets. The market is pricing in the first rate cut from the Riksbank for May, followed by additional cuts during the year.
The performance of credit spreads benefited the fund during the period and the exposure in the real estate sector was the strongest contributor to returns.
The primary market accelerated for sectors and issues were well-received with oversubscribed books and gradually lower spreads. Issuers such as Castellum, Intea and Fabege contributed positively to returns. The fund’s position in 5-year mortgage bonds with fixed rates had a negative impact on returns as longer rates rose during the quarter.
We participated in issues that included Svensk Fastighets Finansiering, Intea Fastigheter and Sparbanken Skåne. The fund held a short duration at the start of the year relative to index but gradually moved to neutral during the quarter. The fund continues to have good liquidity and high-quality credit.