Nordea 1 - Stable Return E EUR |
by Matias Möttölä
We continue to appreciate the disciplined approach to asset allocation and the experienced team behind Nordea’s Stable Return strategy. Continuity is the watchword here. The strategy has been managed since its launch in 2005 by Asbjorn Trolle Hansen, Claus Vorm, and Kurt Kongsted. The trio belongs to the 40-strong multi-asset team, which has seen very low turnover under Hansen’s long watch. For this strategy, the team has developed a distinctive, quantitatively based approach to asset allocation that has been applied consistently. The focus is on risk control as the fund aims to maximize returns while avoiding any losses of capital over a three-year horizon. To achieve its dual goals, the team has identified several clusters of securities both for recovery and recession periods, such as stable equities, government bonds, currency pairs, and covered bonds and credits. In addition, the managers use derivatives, mostly to limit market risk. These instruments are then combined and optimized monthly. As of end-March 2023, most of the fund’s risk-on positions were on developed-markets equity, while on the defensive side the fund trusted a mix of stable stock premiums, bond duration, and currency bets. The fund tends to have less risk than the average fund in its EUR moderate allocation global Morningstar Category, and this shines through, particularly in difficult periods for markets. This was the case again in a volatile 2022 when bond stocks and bonds lost ground, but the BI EUR share class of the Luxembourg fund managed to limit losses to 8.1% compared with a 12.3% drop for the Morningstar Euro Moderate Target Allocation Index category benchmark, despite the team having to close its tactical positions late in the year owing to struggles with yield-curve positioning. Over the long term, the fund currently falls in the best quartile of its moderate category in terms of Morningstar Risk-Adjusted Returns for the BI EUR share class of the Luxembourg fund. These results would look even better without difficulties with upside capture between 2017 and 2021 when Nordea’s selection of stable stocks was left far behind market-leading growth stocks. Over the past 10 years through end-May 2023, the strategy has seen 58% of the category index’s upside while suffering 60% of its losses. |
Morningstar Pillars | |
People | Above Average |
Parent | Average |
Process | Above Average |
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