Arctic Return

Excellence in Nordic short term corporate bonds

 
 
 
 
Consistent return with low volatility

Duration less then 1 year.
Currently 0.25 years (March 2021)


Spread duration less than 4 years.
Currently 1.6 years (March 2021)



Yield 2.1% (March 2021)



Weighted Average Credit Score BBB-


About the fund

The investment objective is to achieve capital  appreciation through investments in a diversified portfolio of bonds and money market instruments, with the Nordic bond market as the main market. Generally the Fund will invest at least 70% of its Net Asset Value in Investment Grade or Investment Grade equivalent bonds or money market instruments. The weighted average rsik score (WARS) will be Investment Grade.

The average modified duration of the Fund's portfolio of assets shall be within the range of 0 – 12 months. The average credit duration shall be  within the range of 0-4 years. The fund is a UCITS fund.


 
 
Who is Arctic Return suitable for?
  • Arctic Return is suitable for those who have funds to spare that you do not want to place in investments with higher risk, but which still provide a higher return than in a savings account.



What is the difference between a bank saving account and Arctic Return?
  • While in a savings account you place the money with the bank and they pay you a stated interest rate, through Arctic Return you will invest in the debt of companies with good credit risk with an average credit score of Investment Grade.

What interest rate can I expect on savings in Arctic Return relative to bank savings accounts?
  • As the companies Arctic Return invests in on average will have to pay higher interest on their debt than the bank rate, you will be able to expect to get more paid by investing in Arctic Return than in a savings account.
How are the interest rates determined on the bonds Arctic Return invests in?
  • The interest rate is determined by a market of investors who, with each bond issuance, contributes to determine the risk premium level when the coupon rate is set. The coupon rate is Nibor plus the risk premium.
What is the difference between the yield and the interest rate I want to achieve on my placement in Arctic Return?
  • The yield is the estimated interest rate that will be achieved by investing in the fund today at current bond prices and underlying Nibor interest rates. This is calculated by taking annual interest payments from the bonds in the funds (nominal coupon) divided by the bond value at current rates. The interest rate obtained may differ from the yield because the rates on the bonds in the fund may vary, the managers may change which bonds the fund is invested in and the underlying Nibor rate may change.


What impact will higher interest rates have on my investment in Arctic Return?
  • Since most of the bonds Arctic Return are invested in have a floating coupon rate, the portfolio yield will increase with higher interest rates. If a bank raises interest rates, it is likely that the Nibor rate, the underlying interest rate of the bonds in Arctic Return, has already moved upwards.
If I put the money in my savings account in the bank, I will be able to withdraw the money the next day. How long will it take to get the money out in Arctic Return?
  • Arctic Return is a so-called UCITS fund, which sets requirements for daily liquidity with two days of settlement. If you ask to withdraw the money on Monday morning, they will be available in your bank account by Wednesday.
What interest rate has Arctic Return achieved historically relative to bank savings accounts?
  • Since its inception in 2010, Arctic Return has provided an interest rate (annual return after fees) of 2.9%, while in bank savings accounts you would have received 1.2% interest rate annually.

What is the coupon rate of the underlying bonds in Arctic Return?
  • Arctic Return invests mainly in bonds with floating coupon interest. The coupon rate consists of a three-month Nibor rate plus a risk mark, which should reflect the risk of investing in the underlying bond. The Nibor rate, which is a three-month money market rate, may change. The risk premium added to the Nibor rate is fixed through the term of the bond.


 
 
 
 
Arctic Return has low credit risk with attractive return in the Nordic market

 
 
Consistently greater return than bank deposit

Monthly distribution of returns

 
 
Since its inception, Arctic Return has delivered significantly better returns than bank deposits. The settlement period on redemption is two bank days and is thus about as liquid as having the money left in a bank account without a fixed term.

This graph shows monthly returns from the start of the fund in November 2010. The vast majority of monthly returns have fallen into the range from 0.10% to 0.40%. As of the end of February 2021, 117 out of 123 months have shown positive returns.

 
 
Performance higher than portfolio yield

High exposure to well capitalized Nordic banks

 
 
The chart illustrates the results of the next twelve months from the start of a quarter and the portfolio's yield at the same starting point. For most 12-month periods, the results have been better than the portfolio's yield.

We are seeking attractive investments in the Nordic fixed income market. The portfolio has a high proportion of the funds invested in fixed income securities issued by solid Nordic banks, but the Nordic fixed income market also provides good investment opportunities in other sectors that provide a good diversification to the portfolio.

 
 
 
 
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Disclaimer: Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager’s skill, the fund’s risk profile and subscription and management fees. The return may become negative as a result of negative price developments. Arctic Asset Management AS seeks to the best of its ability to ensure that all information given in this report is correct, however, makes reservations regarding possible errors and omissions. Statements in the report reflect the portfolio managers’ viewpoint at a given time, and this viewpoint may be changed without notice. The report should not be perceived as an offer or recommendation to buy or sell financial instruments. Arctic Asset Management AS does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. Employees of Arctic Asset Management AS may be owners of securities issued by companies that are either referred to in this rapport or are part of the fund's portfolio.