OREANDA-NEWS. April 24, 2012. SEB's portfolio of funds will include the SEB Danish Mortgage Bond Fund, which invests mainly in bonds (mortgage bonds) issued by Danish financial institutions and secured with real estate, reported the press-centre of SEB.

“The Danish mortgage bond market is relatively exceptional, one of the oldest mortgage bond markets on the global scale. Each mortgage loan is converted into a bond, and effectively each property owner can decide how to repay their loan – whether by making loan repayments or by purchasing bonds denominated at market prices. Issuers of mortgage bonds bear the borrowers’ credit risk, and investors, such as this particular SEB fund, assume the interest risk and the risk that borrowers might repay their debts before the agreed term, reducing the potential expected total return,” said Sven Kunsing, Member of the Management Board at SEB Varahaldus, when introducing the new fund.

The SEB Danish Mortgage Bond Fund is a fund with a low level of risk. It is primarily intended for a client with a lower risk tolerance who wishes to make investments in bonds with a rating similar to that of government bonds but with a slightly higher yield. “As regards this fund, the main risk is that the investment is linked to one specific country, that is, its expected yields depend on the health and prospects of the Danish national economy. Another risk is that during cycles of increases in interest rates, bond funds do not provide high absolute yields,” said Sven Kunsing. Similarly to the real estate markets of other countries, real estate prices in Denmark, too, have declined in recent years, with the trend not broken yet; however, it should be pointed out in a positive light that the officially monitored volume of mortgage loans 3.5 months in arrears has been in a downward trend for some time now, settling at approximately 0.4 per cent of all the mortgage loans. Recently, the settlement price per square metre in residential buildings has averaged at EUR 1500 in Denmark.

Morningstar has given the SEB Danish Mortgage Bond Fund a rating of four stars out of the possible five, indicating a better-than-average actualisation of the yield-to-risk ratio in this fund category. The fund is managed in Copenhagen by a team with long-standing experience; its senior members boasting more than 25 years of experience on the Danish bond market. The fund, registered in Luxembourg and due to launch on the Estonian market, was set up in 2008 with the aim of furthering international sales. During its first three full years of operation (2009–2011), its yields have been 5.0, 5.6 and 8.3 per cent, respectively.