‘If the correction comes in the US… it will also come in Europe’

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Fixed Income

Dylan Emery: With interest rates finally going up and as we are finally coming to the end of a multi-decade bond bull market, what should we do about fixed income?

Susanne Bolin Gärtner:  Fixed income will always have a space, but we have moved out on the risk curve and for my own clients I am a little bit afraid, because they don’t really know what they are holding.

Dylan Emery:  How do you manage the interest rate risk?

Susanne Bolin Gärtner:  Actually, as I buy external funds, it’s up to the fund managers. We like to use flexible funds, unconstrained funds.

Dylan Emery:  Who do you think are the best managers in unconstrained bond funds?

Susanne Bolin Gärtner:  Well, I like Jupiter for instance. BlackRock are huge, but they are also good.

Dylan Emery:  Okay, that’s great.  Karl, same question.

Karl Burck:  I would say there will always be opportunities in the fixed income space, you just have to look in different regions in the world. Also in the credit side, there are different sectors where you can take some opportunistic choices.

Dylan Emery:  When interest rates go up, obviously, the price is going to crash.

Karl Burck:  That is a ‘what if’ type of scenario.  What if rates go up, but slowly, you don’t get such a hit on the price moves. You can allocate, but in a strategic way. So we also go for unconstrained kinds of managers.

If you take that attitude, then in the long run fixed income is very much alive still.

Dylan Emery:  What else in fixed income is worth looking at?

Tuomas Multamäki:  I would put a foot out there for a green bond space.

Susanne Bolin Gärtner:  Yes.

Dylan Emery:  I guess the question is, are green bonds just a marketing exercise?

Karl Burck: [Swedish bank] SEB together with the World Bank made a framework for green bonds. They did a good job to create something that was not a tool to greenwash a portfolio, but actually have a vehicle that is standardised.

For instance, you can actually follow the carbon dioxide reduction from a green bond to your portfolio.  Many portfolio managers calculate their carbon dioxide footprint and you can match them to create a CO2 neutral portfolio.

Dylan Emery:  Susanne, are there any issues with green bond funds?

Susanne Bolin Gärtner:  The fund managers have said that there are some difficulties finding enough paper for them to invest in, because the universe is quite small. That is the only issue I might have.