Looking for safer European investment targets?

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As economic growth is slowing and the returns on government bonds are mainly negative, many investors are seeking safer, low-risk investment targets that will provide a modest, yet attractive return on their investment. With this in mind, the Evli Corporate Bond fund, which combines three different European corporate bond markets, might be an alternative worth considering.

“20 years ago, before the birth of the euro and the emergence of the European corporate bond market, we had a moment of realisation. We figured out that if you invest mainly in safer Investment Grade bonds but also to a smaller degree in more risky High Yield bonds, your portfolio will have a safer risk-return ratio than one containing only Investment Grade bonds. This is because the relationship between these two bond types is not as strong – while one rises, the other one may fall. However, the overall return in this portfolio is better,” says Evli’s Chief Investment Officer Mikael Lundström.

Focusing on both the European and the Nordic credit markets

The Nordic corporate bond market started to grow about seven years ago, and Evli is one of the few asset management firms that have been able to focus on both the European and the Nordic credit markets.

“Combining three markets – the European Investment Grade bond market, the European High Yield bond market and the Nordic unrated bond market – has proven to be a winning formula. It provides a steady, low-risk return on invested assets, which has attracted many major international institutional investors to become our clients,” Lundström says.

Managed by its founder 20 years on

The Evli Corporate Bond fund also owes its success to the extensive experience and expertise of its portfolio management team. It is extremely rare that the founder of a fund is still an active manager 20 years on, but Mikael Lundström continues to be actively involved in the fund’s daily activities. From an investor’s perspective, having seasoned professionals managing your assets is a big plus. The team manages the portfolio in a disciplined, active and dynamic way, controlling any risks that might arise.

“Our portfolio contains good companies which we expect will provide a positive return on assets even in a situation where most of the bond market is providing negative returns. We focus on reliable companies with free cash flow and an ability to repay the capital on the maturity date. We invest only in well-established businesses that operate in a predictable business environment and meet our strict ethical and ESG (environmental, social and governance) standards.”

 

Read more about the Evli Corporate Bond fund and its 20 year journey.

 

KEY FACTS

  • Evli Corporate Bond, launched in 1999, is a long-term fixed income fund that invests mainly in euro-denominated bonds issued by European companies. Investments are made in Investment Grade bonds, High Yield bonds and unrated Nordic bonds.
  • Evli Fund Management Company Ltd, founded in 1989, is a Nordic fund management boutique focusing on institutional investors. It is 100% owned by Evli Bank Plc.
  • Evli Bank Plc, founded in 1985, is one of Finland’s largest investment and asset management specialists for institutions, corporations and private persons. The Group’s combined net assets under management amount to EUR 13.3 billion, and it has more than 250 employees (June 30, 2019).

 

Text: Leena Koskenlaakso

This article has been published in the October 2019 issue of the Blue Wings magazine.