Mandatum Life Allocation portfolio management – November

ML Allocation basket returns were between +0.96% and +8.44% in November.

Positive news about vaccines against Covid-19 strengthened economic growth prospects in November, which also had a positive impact on the investment markets. The interest rate level in the US rose moderately, driven by the improved growth outlook. In the best-case scenario, the vaccinations can, however, stem the spread of a possible third wave of the disease, doing away with the need to impose equally strict restrictions as before. Less strict restrictions would give people more opportunities to consume, improving the outlook especially for sectors that have suffered from the restrictions.

Bolstered by positive vaccine news, the sectors that have suffered the most from the coronavirus crisis led the rally in November. We have therefore adjusted our equity investments moderately in a more cyclical direction in November. In terms of geographical allocation, increasing the share of more cyclical sectors has meant increasing the share of Europe and the emerging markets. Correspondingly, the share of US companies which are focused on technology and consumer goods has been moderately reduced.

Corporate bond credit risk premiums have contracted and prices have risen as economic growth expectations have improved and as a result of central banks’ stimulating monetary policy and securities purchase programmes. At the same time, the return expectation has declined. We have allowed the weight of cash and equivalent money market investments to increase moderately, as the number of attractive fixed income investment opportunities is limited. In late October, we took advantage of the momentarily weakened market situation and made a small additional investment in the ML Opportunistic Loan Strategy investment basket.

In alternative investments, we focus on private debt investments, real estate development projects and high-cash-flow assets. In private equity investments, we are selectively active, looking for individual projects that are not debt-driven. We have made an investment commitment to a private equity investment programme in line with Mandatum Life’s co-investment model which invests in Nordic growth companies.

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