A $12 Billion Fund Says Scandinavian Stocks Now Best Place to BeBy and
Mandatum Life has raised recommendation on Scandinavian stocks
Finnish life insurer also likes Nordic corporate bonds
Buy Scandinavian stocks, regard equities from Britain and Australia with the same skepticism you would those from Russia, ditch all euro-zone bonds and avoid Japan.
That’s Mandatum Life’s recipe for getting through the wave of political risk ahead. The Finnish life insurer has about 11.3 billion euros ($12 billion) in assets under management. It delivered a 7.2 percent return on investments in 2016, according to its annual report.
Mandatum, which also likes small and mid-sized companies across Europe as well as stocks in China, last month raised its recommendation on Scandinavian equities as forecasts for earnings growth rise in the region. What’s more, a strong Swedish krona is boosting euro-denominated returns.
The firm also has a lot of very good things to say about Scandinavian corporate bonds.
“We like credit and we like Nordic credit, for example the quite dramatic come-back of Nordic high yields,” Juhani Lehtonen, head of fixed income and market strategy at Mandatum Life in Helsinki, said in a March 3 phone interview.
“Nordic financials, Nordic banks and their additional Tier 1 bonds have also been performing nicely lately,” he said. “So these long-standing holdings in Nordic fixed income have started to pay out lately.”
Though the U.S. is recovering faster than Europe, “it seems like many of the countries in Europe and Nordics are starting to gather steam rather than losing steam,” Lehtonen said. “Credit growth numbers are looking pretty OK, and starting to be solid in Europe. So the persistent under-performance of European equities versus U.S. equities is starting to reverse.”
Mandatum Life is “happy to be invested in equities, and specifically credit," Lehtonen said. But the insurer doesn’t like the risk-return picture it sees in Europe’s sovereign debt market and, right now, it holds no euro-zone government bonds, Lehtonen said.