High yield have been an interesting area within the fixed income segment in the last couple of years. In addition to strong market growth, high yield have also offered competitive performance. A new fund, SEB European High Yield Fund, aimed at providing institutional and private investors access to the rapidly growing European high yield market, will be launched 3 November 2014.
The expansion of the European high yield market has been driven by that corporates increasingly turn to the bond markets for their financing needs, as traditional bank financing has become more expensive due to new regulations.
A key feature of the new SEB European High Yield Fund is that it will be able to invest in unrated bonds too, which are common in the Nordic region. Therefore the new fund will have a greater exposure to the Nordic market.
Thomas Kristiansson, head of Fixed Income Credit team, says: “The European high yield area is currently in an exciting phase.”
As compared to the US market, the risk for rising interest rates is lower in Europe due to weak expected growth and risk of deflation. Further, corporates in Europe continue to reduce debt and default levels are expected to continue to stay very low. The European market is still growing which will lead to new interesting companies entering the market.
“The high yield market has a higher correlation to the equity market than to the traditional fixed income market. Historically, the return has been less sensitive to interest rates and strongly driven by the specific performance of the companies in the fund. This results in a higher risk than an ordinary fixed income fund, but also a higher return potential,” says Kristiansson.
More information about SEB European High Yield Fund is available on www.sebgroup.lu .