NAV at the end of June was 102.26, an increase of 0.71 points. We are just behind the forecast for the half year due to a weak first month. We hope to be able to catch up in the next few months, right now it looks like this.
We would like to start by drawing your attention to a debate article Fi wrote during the month regarding liquidity in the bond market. Fi highlights the risks of funds with daily redemption rights investing in illiquid corporate bonds.
We share the view that the bond market and in particular the high-yield market is illiquid. For this reason, we created the High Yield Opportunity Fund. HYOP is designed specifically to take advantage of the illiquid corporate bond market.
Read our full press release here: https://kreditfonden.se/den-illikvida-svenska-foretagsobligationsmarknaden-skapar-mojligheter-for-high-yield-opportunity-fund/
Expectations of higher inflation as we mentioned in previous newsletters have contributed to increased volatility in the bond market during the spring. The US Federal Reserve's statement during the month that they can imagine 2 possible interest rate increases in 2023 contributed to this.
However, the prices of HY bonds have not been affected to any great extent by increased inflation expectations. We invest mostly in floating-rate notes with short maturities that are relatively illiquid. We may get a mark-to-market effect from price movements, but the strategy is to hold to maturity and be redeemed in pairs.
Regular inflation does not have to be negative for our issuers or its creditworthiness. On the contrary, it is a sign of growth in the economy and rising prices. Since the nominal amount of the debt is fixed and earnings increase, the debt burden decreases in terms of relative amounts.
We have made some re-balances in the portfolio after a holding was redeemed prematurely, which was a good deal for the fund. We have increased our exposure to the financial sector somewhat.
We are fully invested but have a good pipeline with interesting bonds we want to invest in with the capital from the next issue.
The next issue is on July 31 and it is possible to subscribe as usual through Avanza, among others. See the website for more information about it.