LUXEMBOURG, LU — Nordea Asset Management (NAM) is pleased to celebrate the 5-year anniversary of Nordea 1 – Low Duration European Covered Bond Fund (ISIN: LU1694212348 (BP-EUR), ISIN, LU1694214633 (BI-EUR)) launched in October 2017. With investors reassessing their appetite for risk, covered bonds are an interesting investment opportunity.
While covered bonds have also been impacted by recent market turmoil, their credit quality has not been damaged. Banks’ balance sheets still look strong. Credit quality is supported further by EU regulation that excludes covered bonds from bail-in risks. The regulation draws a clear distinction between regular bank debt (higher risk) and covered bonds (lower risk). This is a solid foundation for covered bonds to continue their track record of over 200 years of no defaults.
The Nordea 1 – Low Duration European Covered Bond Fund has limited sensitivity to interest rate rises (through its low duration) making it an interesting solution in the current market environment.
“The European covered bond market is a large and liquid asset class that many investors often overlook. Yet, the asset class has very low risk of default, 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.”
Henrik Stille, Lead Portfolio Manager of NAM’s European Covered Bond Strategies
Nordea’s Danish Fixed Income & European Covered Bond Team has about 20 years’ experience in the covered bonds space and is managing around €45bn 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.