This is a fund without many direct peers thanks to its pure corporate focus. Unlike most green bond funds that invest in a high proportion of government entities and supranational issuers, this fund avoids some of the constraints that comes with those bonds and offers investors opportunity to be invested in green bonds without diluting the corporate bond exposure in their allocation.
While those government-related issuers have high credit quality, they also tend to be longer in duration, which is hardly what you want in a market like the one we’re in now. And the public companies and agencies can be bogged down by bureaucracy, slow to adapt, and lack the incentives to innovate that we see in the entrepreneurial private sector.
A pure corporate focus means we invest in green companies who can’t just sit back and rely on government backing and therefore have an incentive to be proactive and innovative. These companies tend to be very forward-looking, with a long-term focus. They see a global megatrend in green technologies that not only supports growth of the market but also supports growing investor demand.
That’s why we see a megatrend in green bonds, too. This is also because more and more asset allocators are trying to set minimum limits for responsible investments in the portfolios, like having a minimum share of green bonds, for example. And the green bond share of global bond issuance continues to grow, recently reaching new historic highs. So having an Article 9 fund that consists of 100 percent green bonds, something that is still rare even in Europe, fits these trends extremely well.
The fund is flexible, able to deviate from the benchmark in terms of duration and sector exposure.
This allows us to rapidly adapt to the ever-changing trends in global financial markets and interest rates. As such, the fund has a high tracking error to the benchmark. Thanks to this, the recent outperformance can be attributed to the fund’s short-duration and good selection.
As with all of Evli’s fixed income funds, our focus remains on strong credits with attractive long-term total return potential. These carry the same credit risk as non-green bonds, while offering higher yields than green bonds from supranationals or government entities.
Our portfolio management team has the great advantage of having boots on the ground in the Nordic region, home of many high-quality but unrated corporate bond issuers that offer attractive yields for the same credit quality as top-rated European issuers. This is something we’ve already capitalised on in our other credit funds and continue to do so with the Evli Green Corporate Bond fund.
We take responsible investing very seriously. Our Portfolio Managers have had ESG issues in mind for many years, including exclusion lists going back to the early 2000s. And our fixed income expertise includes over 20 years of a proven, successful track record in both bull and bear markets.
The Evli Green Corporate Bond fund celebrated its two-year anniversary in August. As the green bond market and EU taxonomy both continue to evolve, this fund has the flexibility to adapt without sacrificing performance nor falling behind in resources or reporting. And, as an Investment Grade rated Article 9 fund with extra yield, ‘green’ can also mean ‘health and wealth’ for investors, too.
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