Introducing CABA Flex
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 has a lifespan of 3 years and is still open for new investors. The expected return for the remaining 2.5 years with current spread level is 11% per annum (net of fees).
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 of today, spreads can increase above the levels during the financial crisis back in 2008/2009 before the fund needs to reduce the risk level, and for each passing day, the fund can withstand higher and higher spread widenings.