Property management launches Absalon Bonds right now as an attractive alternative to all investors who have invested in Danish bonds through investment funds. The current low level of interest rates means that it can be difficult to see that an investment in a bond portfolio with Danish government and mortgage bonds is a good idea when also taking into account average annual administrative costs of approximately 0.6 percent for Danish investment associations. with short-term bonds.
It now takes the consequence of and launches Absalon Bonds, which has the opportunity to meet the challenge of low-interest rates by offering investors a low-risk investment with expected positive value at all costs.
Absalon Bonds, as the name suggests, invests only in bonds, but the fund combines investment in Danish mortgage bonds with investments in various types of global corporate bonds. The distribution between the two types may vary depending on the current return expectations.
However, approximately 20 percent has been invested in global corporate bonds with a rating just below the so-called Investment Grade. That is corporate bonds that have a relatively reasonable credit quality and an attractive expected return.
The current return expectation at the unchanged interest rate level is approximately 1.5 percent after costs in one year’s time. It may not sound like that much, but it must be seen in the light of the currently very low-interest rate level, where a Danish bond with a maturity of three to five years can deliver a return of approximately 0.5 percent annually. As mentioned, Absalon Bonds will primarily be invested in Danish mortgage bonds to ensure an expected low risk, but investing in carefully selected global corporate bonds can increase the fund’s total expected return.
The expected return on the type of corporate bonds in which the fund invests is approximately 4-5 percent in one year’s term. The combination of the Danish real-credit bonds and the global corporate bonds gives both low risk and a relatively reasonable interest rate return in light of the historically low-interest rate level.
Absalon Bonds has the opportunity to both hedge the exchange rate risk on the global corporate bonds and the interest rate risk on the entire portfolio. The decision to hedge the interest rate risk is made by the asset management’s asset management and may be established when the asset management estimates that the price to insure against price falls is attractive in relation to the expected return. The fund is currently hedged against moderate increases in interest rates.
The asset management has chosen to keep the price sensitivity low with a duration of just over three years. In round figures, this means that an interest rate increase for the medium-term bonds of about one percentage point will result in a decrease in the net asset value of the fund by just over 3 percent. The primary return element for the fund will, therefore, be the coupon rates that bonds provide. The secondary is price gains due to changes in interest rates and maturities.
As previously described, Absalon Bonds are suitable for investors who wish to have long-term survival of at least one year, and who further consider that an expected return of approximately 1.5 percent annually is attractive when the low risk is taken into account. The fund pays dividends once a year in April and is therefore taxed on realization. This makes it suitable for investing both free funds and pension funds and for companies. Funds under the corporate tax scheme may not be invested in Absalon Bonds without being considered as withdrawal. Absalon Bonds is listed and can be traded via its own online banking and financial institution, but also through wealth management.
Compared to similar departments, Absalon Obligations has relatively low costs relatively, as the supplement to the equity value on purchases currently amounts to a maximum of 0.25 percent and the same rate on sales. The annual running costs amount to only 0.5 percent. The APR is 0.57. However, the costs mean that very short-term investments in Absalon Bonds in under one year cannot be recommended.