Fund Update Special European Covered Bonds Fund Update Special
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For professional investors only* For professional investors only* Fund Update Special European Covered Bonds Fund Update Special European Covered Bonds The month of February has highlighted the globality of our world and how quickly an issue in one country can jeopardize business in other areas. Governments around the globe underestimatedThe month of Februarythe transmission has highlighted of the the globality of our world and how quickly an issue in one country can Covid 19 and were slow to react appropriately. After several months of positivejeopardize returns business in equit inies other, the realityareas. ofGovernments around the globe underestimated the transmission of the Advertising materialthe situation for professional - and its uncertainty investors only* - have caught up financial markets, Covidleading 19 to and a werechaotic slow month to react for appropriatemany ly. After several months of positive returns in equities, the reality of investments. With credit spreads widening, the hunt for safety has pushedthe situation rates into - andthe abyss.its uncertainty Yield levels - have caught up financial markets, leading to a chaotic month for many decreasing again, with in mind the recent Fed intervention and followinginvestments expectations. With of the credit ECB spreads to intervene widening,, the hunt for safety has pushed rates into the abyss. Yield levels the asset allocation dilemma is further amplified: to which extent are we readydecreasing to take again, on risk with to achieve in mind retu therns? recent Fed intervention and following expectations of the ECB to intervene, the asset allocation dilemma is further amplified: to which extent are we ready to take on risk to achieve returns? FundHow did coveredUpdate bonds react in the market – distress Special? Covered bonds offered Editionprotection during the market selloff. When EUR high yield and investment grade credit widened by appx.How 75bps did covered and 25bps bonds respectively react in, the market distress? Covered bonds offered protection during the market overall covered bond market widened by only 2bps over February. Peripheralselloff. covered When EUR bonds high underperformed yield and investment, grade credit widened by appx. 75bps and 25bps respectively, the especially the weaker names of this segment. Yet this remained limited tooverall an overall covered 3-5bps bond widening. market widened by only 2bps over February. Peripheral covered bonds underperformed, especially the weaker names of this segment. Yet this remained limited to an overall 3-5bps widening. FebruaryHow 2020 did Nordea’s covered bond solutions perform? Our covered bond solutions provided the resilience we value strongly in these disrupted times. Our portfolio with long durationHow, the did Nordea Nordea’s 1 – Europeancovered bond Covered solutions perform? Our covered bond solutions provided the resilience we Bond Fund, benefited from the downward development in rates to avalue larger strongly extent in than these its disrupted low duration times . Our portfolio with long duration, the Nordea 1 – European Covered Europeanalternatives, the Covered Nordea 1 – Low Duration Bonds European Covered Bond Fund Bondand the Fund, Nordea benefited 1 – European from thCoverede downward development in rates to a larger extent than its low duration Bond Opportunities Fund. In relative terms, our strategy preserved its strongalternative alphas, thegeneration Nordea 1thanks – Low Durationto our European Covered Bond Fund and the Nordea 1 – European Covered diversified allocation: while peripheral countries detracted, we benefited Bondfrom ourOpportunities safer overweights, Fund. In especially relative terms, our strategy preserved its strong alpha generation thanks to our the large holdings in Danish DKK- denominated covered bonds. diversified allocation: while peripheral countries detracted, we benefited from our safer overweights, especially the large holdings in Danish DKK- denominated covered bonds. Resilient performance of the Nordea 1 - European Covered The monthResilient of Februaryperformance has of the highlighted Nordea 1 - European the globality Covered Bond of Fund (BI- EUR) YTD Bond Fund (BI-EUR) YTD our world and how quickly an issue in one country can Resilient performance of the Nordea 1 - European Covered Bond Fund (BI-EUR) YTD jeopardize business in other areas. Governments around the globe underestimated the transmission of the Covid 19 and were slow to react appropriately. After several months of positive returns in equities, the reality of the situation - and its uncertainty - have caught up financial markets, leading to a chaotic month for many investments. With credit spreads widening, the hunt for safety has pushed rates into the abyss. Yield levels decreasing again, with in mind the recent Fed intervention and following expectations of the ECB to intervene, the asset allocation dilemma is further amplified: to which extent are we ready to take on risk to achieve returns? Source - © 2020 Morningstar, Inc. All Rights Reserved as at: 06.03.2020. European Open End Funds database. Period under consideration: 31.12.2019 – 05.03.2020. Performance in EUR. The performance represented is historical; past performance is not a reliable SourceSource -- © 20202020 Morningstar,Morningstar, Inc. Inc. All All Rights Rights Reserved Reserved as at: as 06.03.2020. at: 06.03 .20European20. European Open End Open Funds End database. Funds database. Period under consideration: indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate as a 31Period.12.201 under9 –consideration: 05.03.2020 .31.12.2019 Performance – 05.03.2020. in EUR. Performance The performance in EUR. The represented performance is represented historical; is past performance is not a reliable result of the sub-fund’s investment policy and cannot be ensured, you could lose some or all of your invested money. Comparison How did covered bonds react in the market indicatorhistorical; pastof future performance results is and not ainvestors reliable indicator may not of futurerecover results the andfull investorsamount mayinvested. not recover The thevalue full of shares can greatly fluctuate as a with other financial products or benchmarks is only meant for indicative purposes. amount invested. The value of shares can greatly fluctuate as a result of the sub-fund’s investment policy distress? resultand cannot of the be sub ensured,-fund’s you investment could lose some policy or alland of cannotyour invested be ensured, money. Comparisonyou could losewith othersome financial or all of your invested money. Comparison withproducts other or financialbenchmarks products is only meant or benchmarks for indicative is purposes. only meant for indicative purposes. Covered bonds offered protection during the market selloff. When EUR high yield and investment grade credit widened And what now…? by appx. 75bps and 25bps respectively, the overall covered At the beginning of the year,1 the struggle to find yield in the bond market*Investing widened for their own by account only – according2bps over to MiFID February. definition Peripheral fixed income market was already a major concern for investors. 1 covered bonds underperformed, especially the weaker names *Investing for their own account – according to MiFID definition of this segment. Yet this remained limited to an overall 3-5bps With market uncertainty, bringing in parallel a renewed widening. downward pressure on rates, lowering the quality of the allocation to achieve higher return is a difficult bet to take. Staying true to our safe investment offering, we do not believe How did Nordea’s covered bond solutions investors should turn away from safe assets. While yields are perform? depressed on an absolute basis, relative value opportunities are just as present in this market as in a market with higher yields: Our covered bond solutions provided the resilience we value and this represents a significant share of the performance we strongly in these disrupted times. Our portfolio with long deliver in our covered bond strategies! duration, the Nordea 1 – European Covered Bond Fund, benefited from the downward development in rates to a larger Covered bonds may very well be one of your safest investments, extent than its low duration alternatives, the Nordea 1 – Low and our active approach has provided on the long run a Duration European Covered Bond Fund and the Nordea 1 – compelling risk-return profile for our investors. Looking for European Covered Bond Opportunities Fund. In relative terms, protection when markets go sour? Our strategy is not only our strategy preserved its strong alpha generation thanks to resilient, but also offers an interesting diversification to EUR our diversified allocation: while peripheral countries detracted, high yield and investment grade credit – the last weeks are we benefited from our safer overweights, especially the large only a taste of the long-term benefits of a structural allocation holdings in Danish DKK- denominated covered bonds. to covered bonds. *investing for their own account – according to MiFID definition And what now…? At the beginning of the year, the struggle to find yield in the fixed income market was already a major concern for investors. With market uncertainty, bringing in parallel a renewed downward pressure on rates, lowering the quality of the allocation to achieve higher return is a difficult bet to take. Staying true to our safe investment