Nordea Asset Management (NAM) has launched a European fund for professional investors in Singapore amid strong demand for absolute return alpha in the fixed income space.

Launched in 2019, the NAM European Rates Opportunity Strategy aims to generate absolute returns by capturing alpha opportunities from covered bonds and focusing on relative valuations rather than relying on directional positions.

The strategy has since delivered strong returns over its five-year track record and attracted strong interest from a range of professional investors, including pension plans and family offices, Nam says. It is now registered as a restricted fund in the city-state.

The actively managed fund targets the alpha opportunity within the covered bond asset class and aims to isolate it using government bonds and derivatives.

“Although covered bonds are considered a safe asset class, there are more alpha opportunities than one might expect,” says Ana Dhoraisingam, chief executive of NAM Singapore and head of Asia-Pacific distribution ex-Japan. “NAM’s European Rates Opportunity Fund taps into a highly liquid, but underinvested and inefficient market to capture alpha opportunities.

“The fund invests at least two-thirds of its assets in European covered bonds or debt securities issued by public authorities, often seen as an alternative to the very high-grade government part of the market.”

Henrik Stille, lead portfolio manager of the European Rates Opportunity Strategy, adds: “Our team has excelled at generating alpha across European covered bond strategies since 2009 and now manages around €40 billion (US$43.23 billion) in AUM, validating our robust and reliable investment approach.”