I have moved to Sweden recently. I plan to say here for a while, so I have converted some foreign currency to SEK to hedge my future expenses. For the fixed income part of my portfolio, I now want to invest these SEK.
So I came across AMF Raentefond mix. As far as I can tell, this seems to be the only global fixed income fund hedged to SEK. There, are of course, other fixed income funds like AMF Raentefond Lang, but they only invest in Swedish bonds. I would like more diversification than that.
My questions are:
Am I correct in my understanding that AMF Raentefond mix is basically the only global fixed income funds (i.e., investing in USD bonds, EUR bonds, etc.) that is hedged to SEK?
I usually don’t buy mutual funds (only ETFs). Am I missing any relevant costs with AMF Raentefond mix, direct or indirect? It says that the annual TER is 0.1%. I assume that the hedging to SEK costs something as well, not sure whether that’s included in the TER. I also don’t want any 5% entry or exit fee, but as far as I can tell there are none. Also, it says that the fund is free to buy on Nordnet? Really? There must be some cost to it, direct or indirect?
I think I once read that the total cost including hedge is 0,13%. No entry or exit fee. Minimum buy of 100kr. I do not think it is free on Nordnet. Perhaps a mistake from them.
Ok, thanks. I don’t think I get around the 0.13% either, what I meant is that I don’t have to pay anything when I buy on Nordnet. I will still pay 0.13% every year, but nothing in the moment I purchase the fund. This is different from an ETF, where you pay 0.05% or whatever when you buy the ETF on an exchange.
@Fnorrbart: SEK fixed income funds investing only in SEK-denominated bonds would be an alternative, but I’d rather have global diversification.
I think you are correct. There is only AMF Mix that is global fixed income fond with SEK hedge.
We have talked about this in another thread. When you invest in global government bonds the yield is quite low. The cost for hedging SEK from USD is quite high. This is an indirect cost in the fund. (FX hedge can cost between -1% to -2% depending on currency).
That’s why I buy a fixed income fund with Swedish government bonds. The yield will most likely be the same or better than a global one with FX hedge.
I am using Storebrand Obligation A. It has Swedish government bonds and with a AA+ rating.
AMF Räntefond Mix is a great fund and more diversified, but I am not sure if it will benefit you in the end. Compared to a Swedish fixed income fond. Especially regarding government bonds.
I think their conclusion is: less focus on yield, more on diversification. Indeed, only investing in SEK bonds from Sweden does seem a bit undiversified.
The operational cost of the hedge must be more in the basis points range. The -1% to 2% that you are referring to must be related to interest rate differentials, I think (e.g., interest rates in the US are higher than in Sweden. By, let’s say 1-2%.). This is expected: you convert SEK to USD, get a higher interest rate in the US… there is no arbitrage, so you give back what you gain from the interest rate differential through the “hedging cost”.
