Portfolio manager comments — Q2 2025
Fund performance was positive during the quarter and rose by just over 1,7% in SEK. The second quarter of 2025 was marked by a volatile interest rate market, as uncertainty surrounding Donald Trump’s tariff policy caused significant fluctuations. Global interest rates generally declined, with the exception of US long-term rates, which rose due to a higher risk premium. Key drivers included technical factors, speculation about reduced foreign demand, and concerns about a growing budget deficit following Moody’s downgrade of the US credit rating.
The European Central Bank (ECB) lowered rates by a total of 50 basis points and the Riksbank by 25 basis points, while the US Federal Reserve (Fed) kept its rate unchanged.
The fund maintained its position for lower US medium-term rates, in line with our forecast of a weaker US economy due to tariffs, deportations, reduced consumption, and a weakening labor market. This positioning contributed positively to returns. We also benefited from steeper yield curves in the US, Europe and Sweden.
In June, we opened a tactical position for higher 5-year Swedish rates relative to Europe, based on our view that the market is overestimating the Riksbank’s rate-cutting potential and that Sweden has a higher neutral rate.
Relative value positions in European swap rates and investments in covered mortgage and corporate bonds contributed positively, supported by a stable credit market. Holdings in emerging market bonds and positions for a stronger SEK also added to returns.
Overall, the fund’s active positioning delivered a solid risk-adjusted return despite continued market uncertainty.