The Nordic region is often associated with economic stability, strong governance frameworks and a disciplined approach to fiscal and corporate management — attributes that are also reflected in its corporate bond market. With a broad mix of issuers, sector exposures and bond structures, Nordic Credit stands apart from traditional euro or global credit universes and can play a distinct role within fixed income portfolios.

In this interview, Henrik Tingstorp, COO Fixed Income Fund Management at Simplicity Asset Management, shares his perspective on the Nordic credit landscape and explains how local market expertise, a disciplined liquidity framework and a balanced investment grade and high yield allocation shape Simplicity’s approach.

Key Highlights

Simplicity is a Nordic-focused asset manager with total assets under management of around SEK 370 billion, of which a substantial share is invested in Nordic corporate bonds. According to Tingstorp, Nordic Credit forms the core of the firm’s fixed income activities. The investment approach is deliberately traditional, relying on fundamental credit analysis rather than quantitative models, and is executed by a small, experienced team that has worked together for many years.

What differentiates Simplicity from broader euro credit managers, Tingstorp argues, is deep local market knowledge and direct access to issuers. This proximity allows the team to assess credits in greater detail, particularly in a market dominated by smaller and often unrated companies.

Why Carve Out Nordic Credit?

From Simplicity’s perspective, Nordic Credit offers a compelling case for a dedicated allocation rather than being absorbed into a broader global or euro credit mandate. Tingstorp highlights strong macro fundamentals, stable political and regulatory environments, and robust governance standards across the Nordic countries as key foundations for credit quality.

The region’s two largest markets, Sweden and Norway, provide liquidity and scale, while the broader Nordic high yield market has evolved significantly since the financial crisis. Today, it encompasses a diversified set of issuers across multiple sectors, offering what Tingstorp describes as an attractive risk-return profile. Smaller issuer size often translates into higher spreads compared to global peers, while governance standards and documentation practices support investor protection.

Market Structure and Inefficiencies

Nordic Credit is characterised by a high proportion of small and mid-sized issuers, many of which are unrated. Sector exposure remains broad, with real estate still representing the largest segment, alongside growing issuance from industrials, financials and renewable energy companies. Green bonds also play an increasingly important role in the market.

While real estate continues to dominate in absolute terms, Tingstorp notes that other sectors are expanding at a faster pace. From a structural perspective, Nordic bonds often feature documentation that investors would consider robust by European standards. However, Simplicity’s main source of opportunity lies less in documentation and more in liquidity dynamics and credit complexity. Assessing smaller, unrated issuers requires local insight and ongoing issuer access, creating inefficiencies that specialist managers can exploit.

Portfolio Construction and Allocation Size

In portfolio construction, Simplicity views Nordic Credit as a complement to investment grade and global credit holdings. Tingstorp also sees it as a potential alternative to emerging market debt, citing stronger fundamentals and governance frameworks.

In terms of allocation size, Simplicity typically considers 10–20% of a fixed income portfolio to be a sensible range for Nordic Credit, depending on the investor’s objectives. Within Simplicity’s own global mandates, Nordic exposure can be significantly higher. Key attractions include higher yield levels relative to euro and global credit markets, while default rates have historically remained broadly in line with European levels.

Managing Liquidity Through Market Cycles

Liquidity management is a cornerstone of Simplicity’s approach to Nordic Credit. Tingstorp stresses the importance of prioritising bonds with sufficient secondary market liquidity and applying strict limits to illiquid positions. Position sizes are adjusted according to liquidity characteristics, and the firm avoids concentration in less liquid securities.

Liquidity buffers are maintained to manage potential outflows, and portfolios are stress-tested regularly. In Tingstorp’s view, diversification across issuers and sectors, combined with local market relationships and access to liquidity providers, is essential to navigating periods of market stress.

Sector Positioning and Risk Preferences

From a sector and capital structure perspective, Simplicity maintains a bias towards investment grade exposure while also allocating to subordinated bonds issued by high-quality companies. The firm is overweight financials, reflecting confidence in the Nordic economic environment and institutional framework.

Real estate exposure, while significant in absolute terms, is underweight relative to the broader Nordic market. Simplicity also avoids issuers with weak fundamentals, limited liquidity or insufficient governance standards. ESG considerations further exclude entire sectors, such as oil and gas, from the investable universe.

Performance in Stress Periods

During recent stress episodes, including 2020 and the interest rate regime shift of 2022–2023, Nordic Credit experienced spread widening and drawdowns, similar to other credit markets. However, Tingstorp notes that historical data shows lower drawdowns and reasonable recovery patterns compared with European credit, supported by market structure and a strong local investor base.

Correlations tend to increase during periods of stress, but remain significantly lower than those observed in equities. While rebound phases can be slower, Tingstorp views prolonged higher spreads as supportive for long-term income generation and total returns.

ESG Integration Without Compromising Credit Quality

Simplicity integrates ESG considerations through exclusions and governance assessments, but Tingstorp is clear that financial strength remains the primary investment criterion. ESG factors are viewed as supportive of long-term performance, particularly through improved governance, but they do not override credit fundamentals.

Deploying Capital in Nordic Credit

Talking about a sensible split between investment grade and high yield, duration and currency risk, Tingstorp argues that a balanced approach is key when allocating to Nordic Credit. In his view, a mix of roughly 60% investment grade and 40% high yield provides a reasonable starting point, combining spread exposure with overall credit quality.

He also points to the structural features of the Nordic market, where floating-rate instruments are common, resulting in relatively short duration and lower interest-rate sensitivity. When deploying capital, he stresses the importance of avoiding rushed execution, instead favouring a gradual approach that makes use of new issuance to manage pricing and liquidity more effectively.