The fund management team strives to generate absolute capital growth over the long-term. The specific aim is to achieve an annual return of three percentage points above the risk free rate (after deduction of fund fees), during a three to five year period at a level of risk corresponding to maximum 5 percent volatility. The investment philosophy is focused on identifying and capitalising on valuation discrepancies in the credit markets, whether among issuers or among different instruments from the same issuer. Additionally, the fund management team uses macro-related strategies for fixed income markets and currency markets.

Investment universe

The fund’s portfolio is invested in a range of instruments related to the credit markets, with a focus on European bonds and credit default swaps. The fund is invested in instruments related to corporates as well as financials, such as banks and insurance companies. The team may invest in regions outside of Europe if the investment meets the fund’s risk and return targets. The investment team uses a number of investment strategies, each with its own risk limit. These different risk buckets have a low correlation with each other. This enables the fund to generate a relatively stable return at a low level of risk. Further, because the fund is invested in credit default swaps, risk may be sold as well as bought. This reduces the fund’s vulnerability to dramatic market swings and makes it a suitable complement to traditional fixed income investments. The fund’s share classes are actively hedged against fluctuations in the fund's base currency, although some variations may occur.

Research

The fund’s positions are derived from a combination of quantitative screening and fundamental credit analysis. Quantitative screening is used to identify pricing discrepancies in the credit markets. Fundamental credit analysis is then applied to determine whether the discrepancy is justified or if it represents an investment opportunity. All holdings are assigned profit targets and stop losses, and are continuously monitored. In addition, the portfolio’s overall composition in terms of credit ratings, sectors, regions as well as correlation between positions, are continuously surveyed.

Portfolio construction

The fund is primarily invested in corporate bonds and credit default swaps and aims for a well-diversified portfolio. The team may also use equity, currency and interest related strategies to manage the portfolio’s level of risk. The ability to sell as well as buy risk is a key feature of the fund, which is in contrast to a traditional long-only fund that can only buy risk. This enables the fund to generate positive returns regardless of the general market movements. For more information of the fund’s investment strategy and risks, kindly see the fund’s prospectus.

Investment team

Örjan Pettersson and Jonas Molin are lead portfolio managers for the fund. Additionally, members of the SEB Credit Fixed Income team work with investment analysis and portfolio selection. The team is based in Stockholm, Sweden.