Evli Short Corporate Bond

Fixed income fund that invests in short-maturity corporate bonds in a diversified manner

NAV
29.05.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
14.844 -4.87 -3.53 -0.80 0.33 1.98
NAV
29.05.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
28.243 -4.87 -3.53 -0.80 0.33 2.31
NAV
29.05.2020
Return %
Year-To-Date
Return %
1 y
Return % p.a.
3 y
Return % p.a.
5 y
Return % p.a.
Since start
99.285 -4.80 -3.34 -0.60 - -0.21

Risk

2/7

Morningstar

3/5

Recommended Investment Horizon

2 years or more

Administrative fees

0.55 % p.a.

Suitable for investors

  • who wish to get a steady capital appreciation with low volatility
  • who wish to get a better return than the traditional money market funds or bank deposits can offer
  • who wish to get an actively managed and well diversified fixed income portfolio in a single product
  • who wish to invest their assets without high credit risk
  • who do not wish to tie-up their capital for a defined time period.

Invest

min. 1 000 €

Evli Short Corporate Bond Fund is a corporate bond fund that invests its assets primarily in euro-denominated bonds with a short and medium-term remaining duration issued by European companies and banks, and in other interest-bearing investments. The investments will be made in bonds with both higher (Investment Grade) and lower (High Yield) credit ratings. The fund generally hedges the currency risk associated with non-euro-denominated investments.

 

The portfolio is managed by

Juhamatti Pukka

Juhamatti Pukka

Investment Objective and Risks

The aim is to achieve a return which exceeds the return of the benchmark during a 12-month investment horizon.

The level of diversification in the investment portfolio is large both within every fixed income asset class and between the asset classes which keeps the fund’s overall risk moderate. A particular characteristic of the fund is to achieve a high risk adjusted return by a large diversification among none or low correlating fixed income assets and by an active reallocation of assets among these asset classes.

The fund’s investments carry a credit risk

Credit risk originates from a bond issuer’s ability to repay the bond’s coupons and capital on the maturity date. In the fund’s investments, the default risk arising from an individual issuer is reduced by diversifying the investments among various issuers. The risk premium (credit margin) required by investors varies during the bonds’ exercise period according to the market conditions and factors related to individual issuers.

As the fund’s floating-rate bond investments are susceptible to changes in risk premiums, the fund’s value may fluctuate.

The fund’s value is affected by interest rate risk

As money market funds carry a small interest rate risk, the effect of interest rate risk on the fund’s performance is small.

Monthly review

30.04.2020

Corporate bond market started to recover strongly from the March crash around the turn of the month and the rally continued until mid-month while investors were busy buying the bonds they rushed to sell in March. Especially strong was the rally in longer dated investment grade and high yield, taking spreads tighter form March wides.

The fund posted a strong net return of 2.29% in April. However, short corporate bonds found themselves on the no man’s land when investors were focusing more in the longer end of the curve. Hence, short end is still priced at the exceptionally wide level. Many companies’ yield curve is still flat, leaving a lot of tightening potential when the curves normalize. By sectors the best performance came from Transportation and Service that were worst hit sectors in March. The laggards included Real estate and Utilities that were clear winners in March. The new issue market was open and very active for strong investment grade names that issued very attractively priced bonds that prioritized liquidity over cost of funding. We participated e.g. Sodexo 2025, Netflix 2025, Deutsche Wohnen 2025, CRH 2023 and PepsiCo 2024 new issues.

Although market is now calmer and number of countries have already announced the gradual relaxation of containment measures, we think credit investors should not feel too comfortable expecting back to “normality”. Corporate profitability has taken a serious hit during spring and, therefore, investors should keep their full focus on companies with strong credit fundamentals that can carry the companies over the deep recession. Short crossover corporate bonds offer now an exceptionally attractive combination of high spread, low interest rate risk and strong credit fundamentals – a perfect mix for patient investor.

The fund's yield to maturity was 3.15% and modified duration 2.23 at the end of the month.

Fund facts

Type of fund Short-maturity corporate bond fund (UCITS)
Investment activity began 17.05.2004
Benchmark index 3 month Euribor
Profit distribution Fund-units are divided into A and B units. Profit share of at least 1.75% is distributed on A units annually.

Downloadable files

Invest

min. 1 000 €