Fund performance was positive during Q1 2024 and the fund rose 1.66% in SEK. Following the strong close to 2023, portions of the movement were reversed with a slight rise in interest rates and a widening of credit spreads. Risk sentiment was strong during the remainder of the quarter and the prices for risk assets were higher than at the outset of the year, which in summary led to a strong market.
The global economy continued with inflation that was higher than long-term targets, with strong growth and a robust labor market. Consequently, we are retaining our view that a downturn in the economic activity, with lower profit margins and higher unemployment, is necessary to be able to bring inflation back to target levels. The fund remains positioned for a weaker risk sentiment with a slightly longer duration and a slightly lower credit risk than its benchmark index.
The holding in Banco de Credito Social Cooperativo SA posted strength in the period. The company is a small Spanish bank that has performed well in light of the strong economic growth in Spain that has resulted in the market’s pricing in of outlooks for positive change to the country’s credit rating. Another example is the Norwegian packing company BEWI ASA, which has shown financial strength in a difficult market that led to higher prices for bonds at the outset of the year. The most negative contributor was the exposure to Swedish real estate companies. These companies posted strength in the strong risk sentiment at the end of 2023 but prices have subsequently normalized. We decreased the holdings in Picard Groupe SA and National Bank of Greece in the period.
Activity in High Yield increased on the issues side during the quarter, which resulted is additional sustainable issues. The fund participated in the 5-year green bond issue by the German subcontractor ZF Friedrichshafen AG.