Key Morningstar Metrics for Evli Corporate Bond
- : NeutralMorningstar Medalist Rating
- : ★★★★Morningstar Rating
- : Above AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
The time-tested investment process at Evli Corporate Bond continues to give it an edge over the competition. The process is strongly focused on issuer selection, and the team invests in both investment-grade and high-yield bonds, with the latter typically accounting for roughly 20%-30% of the portfolio. This approach to portfolio construction has remained unchanged despite the team’s decision to change the strategy’s benchmark in March 2024 from one with a 25% high-yield allocation to a purely investment-grade index.
The team screens the universe for companies that have consistently positive free cash flows. An issuer will only make it onto the team’s list of investible companies if its bonds are also trading at an attractive spread. The strategy’s structural overweighting in Nordic credits (with this stake typically between 30% and 60%) often results in an above-average stake in nonrated credits, as many smaller Nordic issuers are not rated by international ratings agencies. These structural biases can result in a slightly more volatile return profile compared with peers in the euro corporate bond Morningstar Category. That said, long-term investors have been adequately compensated here.
Despite a reshuffle in the portfolio management ranks, this corporate bond fund retains its appeal.
Morningstar has enhanced the way analysts assess alpha opportunity for funds; a key component in our Morningstar Medalist Rating calculation. More of this strategy’s Medalist Ratings than usual may therefore change with this update, even in the absence of changes to pillar ratings or fund costs.
Mikael Lundström has a solid track record with this fund and Evli European High Yield, both of which he has run for more than two decades. Lundström managed this fund alone from 1999 until May 2014 and then shared responsibility for the strategy with Jani Kurppa until December 2024. Although Kurppa left as comanager at the end of last year, he continues to contribute bottom-up ideas and remains an integral member of the five-member group of portfolio managers and analysts that are behind the fund. The team may be lean compared with some of its peers, but it’s adequately staffed, and with Lundström’s continued leadership, we retain our confidence in the fund.
Evli Corporate Bond: Performance Highlights
This strategy’s often sizable high-yield stake, along with a preference for bonds from smaller or lesser-known companies that don’t carry credit ratings from the major ratings agencies, can hurt it in risk-off environments. However, in rising markets those same features can lead to strong outperformance. The strategy’s lower-quality bias held it back in 2018’s broad credit-market selloff and during the coronavirus crisis in the first quarter of 2020. On the other hand, in 2021, the team’s security picks within the less-trodden unrated corner of the corporate bond market helped it end the year ahead of 90% of peers. In 2022, the strategy marginally outperformed its benchmark; its lower average duration helped shield it from the worst pain of that year’s central bank rate hikes, but its outsize stake in midquality credits (rated BBB and BB) hurt. In 2023, the strategy outperformed its benchmark thanks to the team’s picks in unrated issuers, particularly off-benchmark stakes in Finnair and Finnish chemicals company Kemira, which contributed meaningfully to performance. In 2024, bottom-up selection was the main contributor to outperformance, particularly names in the real estate and banking sectors (including Swedish commercial property name Sagax). In 2025 through June, the strategy marginally outperformed the market amid low volatility and tighter spreads, with the allocation to high-yield and nonrated issuers being additive.
