2021-02-09

Monthly reports January 2021

Equity funds

Management comments
The year began with sprawling developments in the stock markets, both among sectors and among companies within the sectors. The big Nordic banks developed strongly through stable reporting and positive reactions to the joint cooperation to combat organized crime together with the Swedish police, which was formalized during the month. Both SEB and Swedbank among the top contributors in Simplicity Norden and Simplicity Sverige.

There was also good activity in the workshops as the holdings Atlas Copco, Epiroc, Volvo and SKF, among others, rose, probably more thanks to continued optimism for the economic recovery than strong reporting, although Epiroc, Sandvik and Atlas Copco all released reports in line with expectations. Industrial companies were also at the top of Simplicity Småbolag Global, where the transport company TFI International soared after the purchase of UPS Freight.

As the mood in the stock market cooled towards the end of the month, grocery retailers got revenge after falling behind the market at the end of last year. ICA and Axfood rose in Simplicity Norden, Simplicity Sverige and Simplicity Småbolag Sverige, while Sprouts Farmers Market in particular rose in Simplicity Småbolag Global.

The funds’ real estate shares fell broadly as hurdles for vaccinations against covid-19 made the market more pessimistic about the recovery of activity in stores and offices. Simplicity Fastigheter declined with the sector.

Stock of the month
Electrolux – “Boring, snoring” you may think, but this is a very interesting stock at the moment which also rose by 7.0 percent in January and was among the biggest contributors in Simplicity Småbolag Sverige, Simplicity Sverige and Simplicity Norden. According to AHAM, an association for the home appliance industry in the United States, US deliveries of home appliances rose by more than 20 percent annualized in the fourth quarter. Electrolux is usually below the figures from AHAM according to Pareto, but during the last quarter they were in line with the growth. Could they have done it again? Could the growth in the rest of the world have been as strong? We get better information on 2/2 when the company releases its latest earnings reports. Exciting, isn’t it?

Global developments in brief
The spread of infection remained high and countries’ restrictions remained extensive, but stock markets seem to have gained greater immunity from this type of news. The focus has shifted to inflation, central banks and continued stimulus. High inflation is ok according to the market, as long as central banks keep interest rates low. However, central bank governors still seem more concerned about the recovery of the economy than about overheating inflationary pressures. The Fed, the ECB and the Riksbank signaled continued support for the economy. Instead, cause for concern came from U.S. congressional contention to Biden’s stimulus measures as well as steeply rising interbank rates in China. This event of the month, however, was the rallying prices of many heavily shorted stocks which happened when retail investors mobilized and triggered short squeezes in GameStop and Nokia, among others.

Simplicity Norden
Month: -0,4%
YTD: -0,4%

Simplicity Sverige
Month: -1,2%
YTD: -1,2%

Simplicity Småbolag Sverige
Month: -3,2%
YTD: -3,2%

Simplicity Småbolag Global
Month: 3,7%
YTD: 3,7%

Simplicity Fastigheter
Month: -3,68%
YTD: -3,68%

All figures are presented in currency SEK.

Fixed Income Funds

Management comments
The newsflow during the beginning of 2021 was dominated by the political developments in the United States. In the Senate election in Georgia, the Democratic candidates managed to win both Senate seats up for election. This means that the Democrats, now also have a majority in the Senate with the help of Vice President Harris’ casting vote. This puts the Democrats in a stronger position to implement their political agenda and there are high expectations in the markets for comprehensive fiscal policy measures to support the US economy. The event that attracted most attention during the month was the attack on the US Congress that took place when angry supporters of president Trump stormed into the Congress building in an attempt to stop the formal appointment of Joe Biden as the new president. The attack was preceded by a speech by Donald Trump in which he, among other things, repeated his accusations of election fraud. The incident led to a new impeachment trial being initiated against him and he thus becomes the first president to be impeached twice. Should he be convicted, he will lose his chances of running in future elections. The unrest eventually abated, and on January 20, Biden was sworn in as the new US president.

During the month, several countries imposed extensive entry restrictions to try to reduce the spread of the two mutated Corona virus strains discovered in South Africa and the United Kingdom. The vaccination process has continued at a relatively slow pace and Astra Zeneca has announced that they will not be able to deliver as many doses of vaccine to the EU as previously promised due to production disruptions. Most of the international stock markets fell during the month, with the exception of the tech heavy Nasdaq index in the US and the Swedish OMX index which both rose.

In the US, the Federal Reserve left its key interest rate unchanged, while emphasizing that it sees some signs of weakness in the economy, especially in the sectors worst affected by the pandemic. However, they did not indicate that this will lead to any policy changes, but continue to put their trust in vaccinations and fiscal stimulus to provide support. The ECB also warned that there is a risk of weaker-than-expected growth in the short term due to weak development in the services sector. This weakness is somewhat mitigated by a stronger situation in the manufacturing industry which is not as affected by the shut downs this time as they were during spring 2020. The ECB also stated that it was prepared to reduce the pace of its asset purchases slightly if the financial conditions would allow it. Even if the ECB would decrease their purchases it is highly likely that they would be prepared to increase their monetary policy stimulus again, in the event of a setback. The Riksbank published figures on its corporate bonds purchases, which showed that by year end they had bought corporate bonds for approximately SEK 3 billion, of which more than 50 per cent in bonds issued by Swedish real estate companies.

In the international credit markets, volatility was high during the month, while the Nordic market benefited from tighter credit spreads in both Investment Grade and High Yield bonds. In the bidding war in the Norwegian real estate company Entra the company rejected both bids placed by SBB and Castellum. Erik Selin, CEO of Balder, which owns about 20 percent of the shares in Entra, also stated that he does not consider any of the bids to be attractive enough. The reporting season for Q4 2020 has started and the trend among the reporting companies shows that most companies have managed to handle the ongoing crisis fairly well. The primary market activity was high and Simplicity participated in transactions in the security company Verisure, the IT company Team Systems and the construction company Bellman Group. All funds benefited from tightening credit spreads in the Nordic market and rose during the month. Simplicity Likviditet, Simplicity Företagsobligationer and Simplicity High Yield rose by 0.13%, 0.42% and 0.68% respectively. Simplicity Global Corporate Bond rose by 0.14% although the performance was somewhat subdued by falling prices for some bonds with longer maturities issued by companies within the banking-, insurance- and utilities sectors.

Simplicity Likviditet
Performance YTD:  0.14%
Yield net of fees: 0.35-0.45%
Duration: 0.16 years
Maturity profile: 1.29 years

Simplicity Företagsobligationer
Performance YTD: 0.42 %
Yield net of fees: 2.10-2.20%
Duration: 1.22 years
Maturity profile: 3.28 years

Simplicity Global Corporate Bond
Performance YTD: 0.14%
Yield net of fees: 2.60-2.70%
Duration: 2.67 years
Maturity profile: 3.62 years

Simplicity High Yield
Performance YTD: 0.68%
Yield net of fees: 3.80-3.90%
Duration: 1.47 years
Maturity profile: 3.58 years

All figures are presented in currency SEK.

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5 June

The Simplicity funds will be closed for trading on June 6, 2024.

Due to Sweden’s National Day, all funds will be closed for trading on June 6, 2024. If you have any questions regarding your fund transactions or holdings, please contact our customer service at 0340 – 21 95 00 or via email at kundservice@simplicity.se. We are available from 8:00 AM to 5:00 PM to assist you.

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Monthly report July 2023

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