Nordic bonds offer great variety and undiscovered gems, but knowledge of the market is the key to making the right choices. This is what the critical investor should look out for.
1. Unrated companies
The publicly-quoted, unrated companies have the best relative value when compared to their European index peers. To select the right kind of portfolio, you need a well-versed Nordic portfolio manager, who understands the companies and the market.
Read more about why many Nordic companies choose to remain unrated.
2. Rated companies
The rated companies are the most liquid part of the Nordic market and have a small pick-up in comparison to core European companies. Most relative value can be found in Nordic currency bonds (SEK, DKK, NOK). The issuers are well-known and trusted, and the bonds are traded both by Nordic and global banks.
3. Private-equity-owned HY
The relative value of these companies varies substantially when compared to the equity-listed issuers. Conducting a selective investment analysis is crucial. To make sure you’re on the right track, you need an active portfolio manager with deep knowledge of the issuers. This market may be illiquid.
4. Unrated, leveraged and cyclical
In this group, there are companies with aggressive balance sheets and exposure to one cyclical sector, companies involved in oil and offshore, as well as companies with aggressive exposure to Nordic real estate. However tempting these issues may look, there are a lot of devils in the details that the skilled Nordic fund manager knows how to take into account.
How to succeed with Nordic bonds?
Nordic corporate bonds add diversity and value to the portfolio. As the majority of the companies are unrated, knowledge of the market and the companies is the key ingredient in making the right calls.
To learn more about the Nordic corporate bond market, download our white paper.
Petter von Bonsdorff
