The landscape for Swedish balanced funds has been transformed by an inflation and interest rate shock. Over four years, the Riksbank raised its key interest rate from 0% to 4%, which was favorable for funds with exposure to bonds. However, a review reveals significant differences in the performance of Swedish balanced funds over the past year.
Among the funds compared by Affärsvärlden, Carnegie Strategifond A has performed the best, with a 22% increase in the last year. The fund has nearly 60% in stocks and just under 40% in bonds. On the other hand, Nordea Stratega 15 has had a more modest performance, with only a 10.5% increase during the same period. However, the portfolio composition is different, with over 70% in bonds and barely 18% in stocks as of August 30.
One aspect to consider when comparing balanced funds, in addition to the portfolio composition, is the fund’s time horizon. So-called generational funds gradually reduce risk as the time of retirement or savings goal approaches. This means that funds nearing a potential withdrawal usually increase exposure to bonds to reduce fluctuations in returns and lower risk.
If we look at the balanced funds with the highest proportion of bonds in the portfolio, the performance is lower, with returns ranging between 10-15% in the past year. However, there are differences.
Both AMF Balansfond and Swedbank Robur Bas 50 A have 51% bonds in their portfolio according to Affärsvärlden’s review. But while Swedbank’s fund has increased by just under 16%, AMF’s fund has risen by nearly 20% in the past 12 months. Both are described as actively managed balanced funds.
The recent changes in interest rates and inflation have certainly impacted the performance of Swedish balanced funds. Investors will need to carefully consider the composition of these funds and their time horizon to make informed decisions about their investments. As the economic landscape continues to evolve, staying informed and adapting investment strategies will be crucial for navigating the uncertainties of the market.