Portfolio manager comments — Q2 2024
Q2 was an eventful quarter. Global interest rates have fluctuated and several central banks began their phase of rate cuts. Inflation and the measures taken by the central banks have had an impact on the financial markets. In April, the focus of discussions was on whether or not the US central bank, the Fed, would cut its key rate in 2024, given that the US inflation rate is being more persistent than expected. This led to upturns in interest rates and weak stock markets. At the same time, geopolitical tensions continued in the Middle East.
However, the situation quickly changed and risk sentiment improved at the beginning of May. Fed chief Powell indicated that it is unlikely that the next policy rate move for the Fed will be a rate hike, which increased market expectations for a soft landing in the economy. The Riksbank chose to be one of the first central banks within G10 to cut its key rate, which was the first cut since 2016. The European Central Bank, ECB, followed with a cut in June. The credit markets have been functioning well and the market for new issues has been very active throughout the entire quarter.
Fund duration has been neutral to slightly long during these significant rate movements. We continued to invest in bonds with shorter durations as the short-term rates continue to offer higher yields than the long rates. We also invested in green bonds from two Norwegian companies: Eidsiva Energi and Elopak.
We also have taken note of the first impact- and allocation report from Natwest Group, where the financing targets small and mid-sized companies owned and operated by women. A total of 14,545 companies have received financing via the social bond, with the majority in England and diversified across sectors with the healthcare and care sectors accounting for approximately one-fourth of the financing.
Castellum, Caruna OY and Maersk were the strongest contributors to fund returns in the period.