Aiming high in the Nordic Corporate Bond market

In the world of finance, the Nordic Corporate Bond Market is unique. It offers attractive excess returns combined with lower volatility in a stable, political and economic environment – something that makes it very attractive to investors.

The size of the Nordic Corporate Bond market is almost the same size as that of the European High Yield market, and comprises of almost 500 issuing companies. Around 54 per cent of issuers and 29 per cent of volumes are unrated, making the Nordics home to one of Europe’s largest markets for unrated issuers, offering a wealth of investment opportunities.

Unrated Nordic bonds are ripe pickings for investors as they offer excess returns of approximately 50-150 bps compared with officially-rated Euro corporate bonds with a similar risk level. Local Nordic institutions, who tend to be buy-and-hold investors hold a majority of these unrated bonds, leading to very low, relative volatility levels.

The Nordic Bond Market and all its opportunities are home ground for Evli. Its investment success is based on being able to find superior risk/return profiles, achieved by using a cash-flow based, analytical approach to individual credits. It is a recipe that Evli has tried, tested, and mastered over two decades.

When expertise truly matters

Evli’s first fund, the Evli Corporate bond was launched in 1999, combining both Investment Grade and High Yield at a time when it was far from the norm. This was followed through with the launch of funds that contained both short duration strategies as well as Nordic Bond strategies.

“Evli has done uncompromising work in the fixed income asset class for 20 years and it is great to see the results,” says Chief Investment Officer Mikael Lundström.

One of the results Lundström is referring to is the recognition bestowed upon the Evli Short Corporate Bond fund by the Lipper European Fund Awards in April 2019. The fund was awarded both “Best Fund over 3 years” and “Best Fund over 5 years” in the “Bond EUR Corporates Short Term” category. Evli also won the “Best Group Bond – Overall small company” in Europe award, which speaks volumes of Evli’s expertise in the European market, not just the Nordics.

This comes on the back of Evli winning the award for “Best Fixed Income Manager” in March 2019 from Morningstar in Spain. The award is based on extensive analysis by Morningstar of fund offerings made available to investors across Europe. The winners are recognised as managers who have demonstrated excellence, while consistently delivering returns for shareholders.

“They are a testimonial to the strong competitiveness of our fixed income expertise in Europe and the strength of our funds,” notes Lundström.

Choosing the right partner

Evli’s fund managers play a key role in making this work. They combine various fixed income classes where possible and focus on finding real credit quality rather than official credit ratings.

Their investment style is also active, with investments only being made in issuers they like, regardless of their weight in the index. This also includes the active utilisation of different credit segments, both rated and unrated.

All of this makes Evli and its funds - including its newest Nordic 2023 Target Maturity Fund with three striking features of set yield, low volatility and fossil fuel exclusion - a favourite with investors looking for partners with long and successful track records.