Nordea Asset Management has expanded its suite of strategies with the launch of the Nordea 1 – European Covered Bond Opportunities Fund.
With yields languishing at low levels and increasing signs of inflation pick-up, many assets once considered a reliable source of return – such as government bonds – are no longer attractive. European Covered Bonds, often an under-appreciated asset class, offer an interesting alternative to investors in search of ‘safe’ yet higher yielding assets.
The new strategy, which joins the Nordea 1 – European Covered Bond Fund and the Nordea 1 – Low Duration European Covered Bond Fund, is designed for investors searching for compelling risk-adjusted returns in the fixed income space. European covered bonds have a strong track record, with the asset class witnessing no defaults in more than 200 years.
“Covered bonds have a much lower volatility than credit bonds and government bonds,” says Henrik Stille, manager of the fund. “They are very attractive if you want to reduce the volatility in a portfolio without losing expected return.”
The success of the Nordea 1 – Low Duration European Covered Bond Fund, which has attracted more than EUR1 billion in AUM in less than a year, shows the merits of this asset class are now being recognised by investors. The new European Covered Bond Opportunities Fund keeps the same low interest rate risk as its predecessor, but expands the credit exposure using limited leverage.