CABA Flex utilizes a buy-and-hold strategy to generate returns by capitalizing on the interest rate differential (spread) between Scandinavian mortgage and government bonds. The fund was launched in December 2022, and has a lifespan of 3 years, and is still open for new investors.
The fund invests in 5-year AAA bonds without option features. These bonds provide access to structural risk premiums found in the stable Scandinavian covered bond markets. Premiums are scaled up through leverage to achieve highly attractive absolute returns.
The portfolio possesses a robust buffer to withstand spread widenings. As time progresses, the spread risk in the underlying bonds decreases, and the equitylevel is expected to increase, leading to a significant increase in the already high buffer. Spreads can increase above the levels during the financial crisis back in 2008/2009 before investors end-up without a positive return when the fund expires.
Past performance does not predict future returns. Forecasts are not a reliable indicator of future performance.