Portfolio manager comments — Q2 2025
Fund performance was positive during the quarter and rose by just over 1% in SEK. The second quarter was marked by a volatile interest rate market, as uncertainty surrounding Donald Trump’s tariff announcements caused significant fluctuations. Global interest rates generally declined, with the exception of US long-term rates, which rose due to a higher risk premium. This was driven by technical factors, speculation about reduced foreign demand, and concerns about a growing budget deficit following Moody’s downgrade of the US credit rating.
Central banks continued to cut policy rates: 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 deteriorating labor market. This strategic focus contributed positively to returns during the quarter. 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, investments in covered mortgage bonds, and corporate bonds also contributed positively, supported by a continued stable credit market.
Overall, the fund’s active positioning delivered a solid risk-adjusted return despite ongoing market uncertainty.