Nordea 1- Low Duration European Covered Bond Fund reaches €1 bn milestone in less than one year
The Nordea 1 – Low Duration European Covered Bond Fund (ISIN: LU1694212348 (BP-EUR) has gained traction with conservative investors searching for yield.
Launched on the 24th of October 2017, the Nordea 1 – Low Duration European Covered Bond Fund (the “Fund”) has quickly reached the €1 billion in Assets under Management milestone in less than one year. With investors reassessing their appetite for risk, the Fund has shown strong traction and interest from conservative investors looking for low risk options that put their cash to work.
The European covered bond market is a large and liquid asset class that many investors often overlook. Yet, the asset class exhibits the highest safety standards, an important feature for any risk-averse investor. Covered bonds offer investors a double layer of protection against default: they are high quality bonds with the additional backing of a highly regulated asset pool. They are also favourably treated by EU regulation in case of insolvency, similarly to deposits below €100,000.
Adding to the safety inherent in covered bonds, the Fund is a low duration solution which means it limits the risk for investors in case of rising interest rates.
While investors more familiar with the asset class often consider it a passive play, the asset class offers potential for modest alpha generation. “Most investors perceive covered bonds as boring and access the asset class through passive solutions—this is a huge fallacy,” says Henrik Stille, portfolio manager of the Fund. “The European covered bond market is inefficient in a number of ways, and an active and experienced investment manager can capitalise on these opportunities.”
Nordea’s Danish Fixed Income & European Covered Bond Team has about 20 years’ experience in the covered bonds space and is managing around €39bn of assets with a strong record of alpha generation. The team is based in Denmark, one of the largest and oldest markets for covered bonds. The success of the Nordea 1 – European Covered Bond Fund as well as the need to offer low risk investment options for investors, were the catalysts behind the launch of the new Fund.
“Many investors don’t know where to turn. They are afraid to take on market risk, but are seeing their savings eroded by rising inflation,” says Christophe Girondel, Global Head of Institutional and Wholesale Distribution at Nordea Asset Management. “The new fund offers them an option to start their investment journey and put their savings to work.”