Portfolio manager comments — Q2 2025
Fund performance was positive during the quarter. The second quarter of the year was marked by high volatility and an initial decline in risk appetite following the introduction of US trade tariffs and the escalation of the trade war between the US and China. Credit spreads widened due to the deteriorating trade policy environment, while interest rates fell in Sweden and Europe but rose in the US. The primary market, which had been strong in Q1, came to a halt as risk appetite weakened.
Instead, the fund was active in the secondary market at very attractive levels, increasing exposure primarily to the banking and financial sector among issuers with high credit quality. As the initial rhetoric from the White House softened and real trade negotiations began to take shape, risk appetite returned and credit spreads tightened.
The fund extended its duration during the first quarter, which contributed significantly to the positive return in Q2 as interest rates declined. At the same time, the fund’s investments in the secondary market at elevated credit spreads added value as spreads narrowed.
During the period, the fund increased its holdings in bonds from SBAB, Lyse, Arjo, Intea, Eidsiva Energi, Fastpartner, Sydvatten, Nibe, Latour, Heimstaden Bostad, Klarna Bank, and Tomra. At the end of the quarter, the fund maintained a high interest rate duration, as we see potential for falling market rates. This is in line with expectations that Norges Bank, the Riksbank, and the European Central Bank will need to stimulate the economy to support growth, while inflation has declined sharply and both the Norwegian and Swedish krona have strengthened significantly—both against the dollar and the euro.