Insights
Insights
Nordic high yield market – diversification benefits and yield pick-up opportunities for EUR HY investors
In this whitepaper, we delve deeper into the Nordic high yield market, its special characteristics and current outlook. Our assessment suggests compelling additional diversification and yield pick-up opportunities for Euro high yield investors seeking alternatives within credit asset classes. The whitepaper commences with an introduction and subsequently navigates through the differentiating market factors, barriers to entry, historical return characteristics, as well as current outlook.
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European leveraged loans posted the highest annual return since 2009, and still provide good value
In last year’s white paper, where we introduced the asset class itself, we provided our very optimistic view on the prospects of leveraged loans for 2023 and onwards, e.g. through several scenario analyses considering the convexity and yield levels at hand. This year, we will focus on a few select themes that were prevalent in 2023 in addition to providing our take on what the conditions look like for 2024.
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Value-add real estate investors are better positioned in almost all market conditions
Mandatum Asset Management is a significant real estate investor with over €1 billion invested in both local and international markets. The team has built strong and long-term partnerships with successful and established European real estate managers focusing on value-add strategies. In our view, value-add real estate is a provider of future-proof space, particularly in this current environment, and suits a medium-term investor better than core real estate.
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Mandatum Asset Management’s active ESG dialogue with Incus Capital
In June 2022, MAM made an investment in Incus European Credit Fund IV, which invests in non-sponsor asset-backed private credit transactions in Southern Europe. While the fund scored poorly in MAM’s ESG assessment, MAM began an active dialogue with its management team to improve its ESG process and practices.
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From the Nordics to the limelight
Mandatum’s Nordic High Yield fund received an award in May for the best Europe high yield fund over three years. That is, over the same time period as coronavirus, inflation, high interest rates and war ravaged the world. The fund’s Senior Portfolio Manager, Juhani Lehtonen, reviews the last few years in this blog post.
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Private Debt: An asset class that benefits from volatility
Private debt is a diverse and complex asset class that often benefits from a volatile market, and Mandatum Asset Management believes a systematic allocation to both direct lending and opportunistic strategies is critical to take advantage of these opportunities. Underlying private debt strategies perform differently based on underlying market conditions, as do existing and new investments. Allocating to a diversified Private Debt programme on a rolling basis allows for a constant level of dry powder that can be deployed into attractive opportunities.
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European leveraged loans: Compelling entry point in an attractive asset class
European leveraged loans are an attractive component to diversify a high yield corporate credit portfolio. As floating rate instruments, leveraged loans significantly outperformed high yield bonds in 2021-2022, yet wider credit spreads and higher base rates are still providing an attractive entry point into the asset class. Our illustrative scenario analysis further points to continued strong performance over the next few years, even with very pessimistic default assumptions.
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Finland’s thriving ecosystem for world-class growth companies
As one of Europe’s fastest growing start-up hubs, Finland offers an ecosystem that nurtures the development of world-class growth companies. While the investor landscape includes local and international players, there are few local growth managers who are able to invest in scale. Mandatum Asset Management Private Equity (MAM PE) is an active Nordic growth equity investor with an extensive history of making sizeable commitments to local companies, supporting their growth ambitions through active ownership and value-add assistance.
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Mandatum AM Private Debt Program vs. EUR High Yield
Since publishing our whitepaper over the summer, our Private Debt program has continued to outperform its public market equivalent, the European High Yield Index. The main driver of the strong performance is the expected realizations and increase in the value of our maturing portfolio given recent activity. Additionally, one return driver has also been an investment in a new subsegment of the market: private equity portfolio financing.
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ESG Implementation in our Private Debt Program
Mandatum Asset Management (MAM) is at the forefront of ESG integration with over 10 years of experience. Our approach to responsible investing ensures that we not only account for financial results, but also recognize and consider the environmental or societal impact. As a result, many of our investments and operations are committed to promoting economic, social and ecological sustainability.
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Diversified private debt program as a tool for countercyclical investing
Nations are competing to vaccinate their citizens and we are finally headed towards normality. But it is still a mystery how that normality - or the new normal - will look like. What the pandemic has already shown is how private debt and especially diversified private debt programs have certain benefits over e.g., private equity or closed-end real estate funds in this kind of environment.
