Portfolio manager comments — Q2 2025
Fund performance was positive during the quarter and rose by just over 2% in SEK. There were significant interest rate movements following Donald Trump’s various tariff announcements. Early in the quarter, rising credit risk premiums negatively affected corporate bond investments. However, spreads later narrowed, and overall performance for the quarter was positive.
Long-term rates declined slightly in Sweden, while bond yields in the US and Europe were largely unchanged during the quarter.
Central bank actions were mixed. The US Federal Reserve (Fed) kept its rate unchanged, while both the Riksbank and the European Central Bank (ECB) cut their policy rates. We expect both the Fed and ECB to cut rates further this year, and the likelihood of another cut from the Riksbank has also increased.
Long-term market rates are expected to rise due to improving inflation and growth outlooks, which would lead to a steeper yield curve, with short-term rates trading below long-term rates.
The fund delivered positive returns in Q2, particularly from corporate bond investments, which recovered from weak performance earlier in the year. Emerging market bond holdings also contributed positively.
In the interest rate portfolio, we have maintained a shorter duration than usual, as we see a risk of rising long-term rates going forward.
The fund continues to hold an overweight in corporate credits and emerging market bonds, where we believe the running yield remains attractive.