General Market Review
Global equity markets encountered a more difficult backdrop in February. U.S. indices came under pressure as political and geopolitical events unsettled investors. The S&P 500 slipped by 1%, while the tech‑focused NASDAQ fell by more than 3%. Sentiment worsened after a landmark U.S. Supreme Court decision declared President Trump’s key tariff initiative unlawful and as geopolitical tensions surged, with the United States entering a military confrontation with Iran toward the end of the month. Expectations of prolonged instability in the Middle East pushed oil prices higher throughout February.
On February 20, the Supreme Court upheld lower‑court rulings confirming that the power to impose broad tariffs lies with Congress rather than the executive branch. While the decision leaves the roughly USD 170 billion in existing tariff revenues untouched, it introduces considerable uncertainty into the future direction of U.S. trade policy. Many of the administration’s trade agreements—largely structured around either the threat or imposition of tariffs—may now require renegotiation. Markets responded cautiously as investors reassessed the outlook for U.S. domestic and foreign policy.
The fourth‑quarter earnings season was robust. Companies in the S&P 500 reported year‑on‑year earnings growth of 14.2%, the fifth consecutive quarter of double‑digit gains and well above earlier expectations of 8.3%. Meanwhile, the U.S. economy expanded at an annualized rate of 1.4% in Q4 2025, according to the latest estimates. Growth was partly constrained by reduced government spending following the 43‑day federal shutdown in October and November.
Labor market data for January showed an increase of 130,000 jobs, driven mainly by hiring in the healthcare and construction sectors. The Federal Reserve did not hold a policy meeting in February; attention now shifts to the upcoming FOMC gathering on March 17–18.
U.S. Core Consumer Price Index data came in lower than expected for January, with year‑on‑year inflation easing to 2.4% from 2.7% previously.
Yields on 10‑year U.S. Treasuries fell by 29 basis points, from 4.23% to 3.94%, while 10‑year German Bund yields declined by 19 basis points, from 2.83% to 2.64%.
The MSCI World Index rose by 0.73% in USD terms, and the MSCI Europe Index gained 4.05% in EUR terms.
Portfolio Management Report
High‑yield risk premia increased modestly, with U.S. HY spreads at 291 bps and European HY at 279 bps. The spread widening move was moderate at overall spread levels remain low by historical standards.
The Nordic high‑yield market posted another solid month, returning 0.8% in February and bringing year‑to‑date performance to 1.8%. Excluding the 20 largest positive and negative contributors would have added 15–20 bps to returns, largely reflecting issuer‑specific developments. Price gains among top performers were more muted than observed through most of 2025. Oil Services and Shipping led sector performance with returns above 1%, while most other sectors delivered between 0.5% and 0.8%. The E&P segment lagged due to a sharp repricing of Lime Petroleum’s two bonds. Index spreads remained broadly stable, closing the month at 484 bps.
Name‑specific adjustments were evident, with Lime Petroleum, Sigma Holdco, and SGL Group exerting the greatest drag on returns and spreads. Overall, secondary‑market spreads remain well anchored and broadly in line with primary‑market levels when adjusted for duration. Index yields stand at 7.7%, around 55 bps below the average coupon. Primary‑market volumes reached EUR 1.3bn across 17 transactions. Average primary spreads widened significantly to 621 bps, reflecting greater risk differentiation. First‑time issuers accounted for 55% of volumes and priced at materially wider spreads than repeat issuers, underscoring a more selective investor environment. The primary market remains open and supported by strong cash balances in bond funds, but investors are cautious toward lower‑quality transactions, consistent with a view that selectivity is warranted at this stage of the credit cycle. Many funds continue to hold elevated IG allocations, suggesting room to rotate into HY should valuations become more attractive.
During the month, we increased the fund’s exposure to Oil Exploration & Production by participating in Panoro’s USD 150m secured bond issue, offering a yield‑to‑worst of 9.5%. Panoro Energy ASA is a Norwegian‑listed independent E&P company with production, development, and exploration assets across Africa. The company has agreed to acquire a 40.375% stake in Block G in Equatorial Guinea for USD 180m. To finance the transaction, Panoro tapped its existing USD‑denominated bond maturing in December 2029, bringing the total outstanding amount to USD 300m. In addition, the company raised approximately USD 49m in new equity to support the acquisition. Following the transaction, net debt stands at USD 172m, corresponding to a leverage ratio (net debt/LTM EBITDA) of roughly 1.23. The bonds represent the company’s only first‑lien debt, secured by its main asset‑holding subsidiaries and protected by a negative pledge restricting security over non‑core assets.
For more information, you can find our latest Factsheet – February 2026.
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