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INFORMATION ON COVID-19 MEASURES IN Storebrand Asset Management

Storebrand Asset Management monitors the development of COVID-19 closely, both as part of our corporate social responsibility and our responsibility as an asset manager. We follow the authorities' recommendations and also implement our own measures.

Published 13.03.2020 by Storebrand Asset Management

The World Health Organization WHO has upgraded and classified the outbreak of the virus COVID-19 as a pandemic. The risk of spreading the virus is considered very high. Governments, businesses and public agencies have stepped up the crisis management significantly, and the public debate has changed character. Significantly more powerful measures are now taken to limit how fast the virus is spreading, with the closure of schools, ban on major events and quarantine after stays abroad, to name a few.

Storebrand Asset Management monitors the development of COVID-19 closely, both as part of our corporate social responsibility and our responsibility as an asset manager. We follow the authorities' recommendations and also implement our own measures.

Measures taken

We have high readiness and have implemented a number of measures to best deal with this demanding situation. Our focus now is to secure the business in the best possible way for our customers, employees, and suppliers in a situation we must prepare for may last a while. Maintaining financial services and safeguarding functioning financial markets is considered a critical task for society. The measures should protect life and health by limiting the spread of infection. We have therefore taken steps that include cancellation of travel, events and meetings, and employees who do not have socially critical tasks are required to work from home in line with the authorities' recommendation. Our social and customer responsibility is that we also ensure that we are able to maintain sound management and operations.

On the operational side, we have implemented a number of measures to ensure operational stability in our processes. We have good stability in fund pricing, handling of orders and settlement of transactions. We are in continuous contact with our banks and major suppliers to ensure that we have access to up-to-date data and the support we need. We are monitoring the situation closely and are ready to take further action if necessary.

Capital markets

The considerable turmoil we have seen recently persists. Increased dissemination of COVID-19 and the implementation of measures to prevent spreading will have increasingly important consequences and will reduce global growth this year. We assume that the number of cases of infection must level out before the situation improves.

This, together with uncertainty related to further spread and related effects, is now priced into the securities markets. US equities are now down about 20% from the peak levels earlier this year. At home, the Oslo Stock Exchange fell almost 30% from the peak in January.

The market turmoil is also reflected in the interest rate and credit markets. Credit spreads have come out in the credit markets, both within "investment grade" and especially within "high yield" where the stock market turmoil is most clearly reflected. However, interest rates have fallen markedly throughout the yield curve, thus contributing positively to bond returns. For example, the 10-year government rate in the US and Norway has fallen by 120 and 70 basis points respectively so far this year.

We expect market volatility to continue for a period to come until the situation is perceived as more clarified. This means that we will continue to see days of significant price movements, both up and down. However, we see that central banks are in standby and readiness mode, and both the US and UK central banks have already cut interest rates by 50 bp, where the latter has also launched further measures to purposefully mitigate the effects of the pandemic on business and the economy. We expect that the European Central Bank will also follow up with further measures. The central bank of Norway (Norges Bank) cut its interest rates by 50 bp today, March 13th, and the government has announced a number of crisis measures for the business sector. In addition, we now see more and more countries presenting or working on a number of measures to actively combat the pandemic and support the business community in each country.

Historically, outbreaks of a pandemic (swine flu in 2009, SARS in 2003) gives loss of activity, stock market decline and market turmoil. The fall in activity levels in 2003 and 2009, on the other hand, proved to be short-lived and quickly recovered once the extent of infection and activity levels normalized. However, the spread of the COVID-19 virus is more extensive, and there is a great deal of uncertainty about the extent of the spread and scope of measures, especially in the United States and Europe, which makes it difficult to assess the overall real economic impact.

Experience from earlier periods of great market turmoil is that at some point the fear takes over and causes excessive falls in the markets. We believe that this is the case now. In our portfolios (allocation mandates) that follow our market view, we use the large market movements to rebalance and gradually increase stock exposure. Layoffs and bankruptcies will occur in some vulnerable sectors and overall productivity will fall, but much of the activity level will most likely normalize when the spread of COVID-19 comes under control.

The measures affect each one of us, and will have a ripple effect on the suppliers and business we are in contact with. We ask for your understanding that this is a challenge for all of us, and will do our utmost to ensure that the consequences will be a minimal as possible.

Historisk avkastning er ingen garanti for fremtidig avkastning. Fremtidig avkastning vil blant annet avhenge av markedsutviklingen, forvalters dyktighet, investeringsrisiko og kostnader ved forvaltning. Avkastningen kan bli negativ som følge av kursfall.