Handelsbanken’s Kevin Liang has reduced his Norwegian government bond holdings in his portfolio from 35% to 5% as he seeks to more closely manage duration risk.
Liang, who runs the NOK 457 million (€61 million) Handelsbanken Obligasjon fund, said he is concentrating on managing both interest rate and duration risk, which has seen him heavily trim his Norwegian sovereign debt exposure.
Norwegian government bonds, as well as state-backed covered bonds, had made up 35% of his Nordic bond portfolio, but he cut this to 5% at the end of December.
‘I lowered the position quite a bit and reduced exposure in government bonds and reduced the duration portion because we saw the situation becoming more positive this year,’ he said.
‘People say that they are doing better and that is why, at the moment, we have very low exposure in government bonds and covered bonds.’
However, Liang, who took over management of the fund in December 2010, said he is keeping a close eye on how the scenario plays out in 2013 and has not discounted a return to Norwegian sovereign debt.
‘There will be more volatility this year in the market and so when we get to that I think Norwegian government bonds will become more interesting to own again because of their safe haven status.’
Liang’s long-only fund invests in investment grade debt with a maturity of up to five years. He can invest in Norwegian government or local government bonds, as well as unsecured senior bank bonds and mortgage bonds.
The Handelsbanken Obligasjon fund has returned 14.5% in the two years since Liang was named lead manager. Over the same period, its Citywire benchmark, the Citigroup Norway WGBI TR, 10.5%.
Kevin Liang is set to feature in the Managers to Watch feature of the February edition of Citywire Global magazine.