Portfolio Managers comments
During the G7 summit in the UK, the G7 leaders emphasized the importance of strengthened international cooperation and that financial policy stimulus is important to maintain the economic recovery. Although some of the economic figures released, did not meet market expectations, it is clear that we are in a recovery phase in the world economy. The markets major concern at the moment is how central bank tapering will be received but so far, central banks around the world have not given any clear indications of how they will act going forward. Despite high inflation figures during the month, US long-term bond rates fell slightly as the market put faith in the Federal Reserve’s message that the higher inflation is transitory. Most stock markets rose slightly during the month and the Nasdaq stock market, which has had a slightly weaker performance than other US stock markets during spring rose by 5.59 %. In Sweden, the Swedish government was forced to resign after a no-confidence vote in the Swedish parliament. The speaker of the Riksdag will now lead the process in order to find a way to form a new government supported by the parliament. The market has not paid much attention to the Swedish government crisis as the international development is of greater importance.
After its Executive Board meeting, the Federal Reserve reiterated that it does not intend to reduce its asset purchases until the economies have recovered further. However, the statement did not provide any clear guidance on what to expect in the near future from the Fed in terms of tapering. What surprised many observers was the Fed members’ so-called “dot plots” which showed that eleven of the members of the Executive Board now expect a first interest rate hike in 2023. This is an increase compared to the previous meeting when only five of them expected an hike in 2023. In Europe, the ECB did not make any changes to policy rates or other monetary policy actions in connection with its board meeting. They emphasized that inflationary pressures have eased in the medium term, even though growth prospects look better in the short term. To avoid uncertainty, they announced that the pace of their bond purchases will remain unchanged until at least September.
The credit markets had a positive development during the month thanks to falling credit spreads and continued high risk appetite. Even though inflows into Swedish corporate bond funds has been muted, it is clear that there is a demand for higher yielding assets. Primary market activity was high and a large number of companies took the opportunity to issue new bonds. The green- and social bond issuing trend continued and during the month Simplicity participated in new issues in the med tech company Getinge, the real estate developer Bonava, the pump service company Lakers Group and the steel company SSAB, all of which issued bonds under different sustainability framework. The credit rating agency Standard & Poor’s put the AP fund-owned real estate companies Hemsö and Willhem on negative credit watch which may lead to a downgrade of the credit ratings in both companies. Although the action is primarily due to a change in S & P’s methodology, the credit spreads traded up in both Hemsö- and Willhem bonds.
All funds rose in June on the back of the strong market performance. Simplicity Likviditet and Simplicity Företagsobligationer rose by 0.05% and 0.31%, respectively, while Simplicity Global Corporate Bond and Simplicity High Yield both increased by 0.63%.
Performance YTD: 0.43%
Yield net of fees: 0.30-0.40%
Duration: 0.18 years
Maturity profile: 1.46 years
Performance YTD: 2.32 %
Yield net of fees: 1.60-1.70%
Duration: 1.11 years
Maturity profile: 3.21 years
Simplicity Global Corporate Bond
Performance YTD: 2.95%
Yield net of fees: 1.90-2.00%
Duration: 2.61 years
Maturity profile: 3.40 years
Simplicity High Yield
Performance YTD: 4.37%
Yield net of fees: 3.00-3.10%
Duration: 1.66 years
Maturity profile: 3.49 years
The first half of the year ended with another somewhat scattered month in terms of returns, with the health care companies at the top, including the holdings in Novo Nordisk, Astra Zeneca, Getinge and Arjo rising in the funds. The sentiment remained strong for real estate companies, albeit with less wide positive returns than earlier in the spring. Sagax rose after diversifying its portfolio through both foreign real estate acquisitions and stock purchases in peers on the market. Platzer also contributed to the returns in all our equity funds except Simplicity Småbolag Global.
For Simplicity Norden and Simplicity Sverige, the large holding Hexagon rose by 7% after the measurement technology company announced that they are looking more closely at consumer-related products and that they are developing solutions for the production of renewable energy. The banking sector also performed positively for the two funds as the big banks received raised recommendations following last month’s downturn. In Simplicity Småbolag Global, generator manufacturer Generac continued its steep upward climb with a return of 26% during the month, while IT company Sykes rose after a takeover offer with a premium of 30%.
Stock of the month
Platzer has Gothenburg’s best places. For example, they have a logistics and industrial area in Arendal that will act as the site of a pilot project for autonomous transport solutions, a collaboration that also includes Volvo and DFDS. The real estate company has chosen to focus entirely on developing areas in Gothenburg that they want to make Europe’s best city to work in. With that in mind, all of us who have driven a car in the city are keeping all of our fingers crossed that the pilot project will be successful. During the month, the stock was also included in the FTSE EPRA Index, received a good credit rating from Nordic Credit Rating (BBB-) and was green labeled as a sustainable investment by Nasdaq. With this month’s increase of 10%, the holding was one of the largest contributors in Simplicity Norden, Simplicity Sverige, Simplicity Småbolag Sverige and Simplicity Fastigheter.
Global developments in brief
U.S. inflation showed higher-than-expected price increases in May. The CPI was up 5.0% from the same month a year earlier, 0.3 percentage points higher than expected. Still, the news caused U.S. long-term interest rates to fall slightly as stocks rose. The odd pattern can be explained by the fact that inflation is still not high enough for the Federal Reserve to pull the brakes. The fact that the covid-19 delta variant is spreading in Europe and North America had only small and temporary effects on the stock markets at the end of the month, perhaps because studies suggest that the current vaccines provide sufficient protection against this variant as well. The government crisis in Sweden seemed almost unnoticed by the stock markets, although the krona weakened slightly.
All equity funds showed more or less neutral performances during the month, with Simplicity Småbolag Global performing most positively, up 1.8%. Simplicity Norden and Simplicity Fastigheter were up 0.6% and 0.4% respectively, while Simplicity Sverige and Simplicity Småbolag Sverige declined marginally by -0.2% and –0.8%, respectively.Tillbaka till Nyheter