Top Bond Manager in Sweden Sees Risk of Mass Corrections in 2021

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One of the best-performing credit managers in Sweden says bond investors might be among the few to avoid losses this year as he predicts selloffs across riskier asset classes.

Mikael Anttila’s SEB Corporate Bond Fund SEK delivered a 7% absolute return last year, which Morningstar Inc. says was the best of any money manager in Swedish krona corporate bonds. But this year will be a lot tougher, according to Anttila.

“If we get a situation where we get 0% return, it is still attractive,” he said by phone. “Because I see a risk of so many corrections in other markets.”

The outlook for investment-grade bonds, a category in which Anttila is evenly spread across Europe and the U.S., has darkened to such an extent that the best investors can hope for in 2021 is capital preservation, the SEB fund manager said. He says equity market valuations are inflated, and warns of “asset price bubbles.”

“Nasdaq’s P/E Ratio is at 70 and Down Jones or S&P 500 is 30, so they are at historical, all-time highs,” Anttila said.

Top Bond Manager in Sweden Sees Risk of Mass Corrections in 2021

The SEB fund manager is now dialing down risk in investment-grade bonds by going underweight BBB- notes and avoiding names such as General Motors Co. and Fresenius SE & CO KGaA. “We are tilting a bit toward higher quality names, in both Europe and U.S. markets,” Anttila said.

With almost a third of high-grade bonds in Europe now trading at negative yields, and debt burdens swelling amid enormous stimulus packages, Anttila says some sort of correction will be hard to avoid.

“There are so many problems that we can see that might cause a disturbance in the market,” the fund manager said. “So the start of the year has already been difficult.”

One notable exception might be assets that fulfill environmental, social and governance criteria, where demand outstrips supply. “Everything else equal, there should be better long-term demand for them,” he said.

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