Portfolio manager comments — June 2025
Financial markets shifted their focus from US trade tariffs to the geopolitical tensions between Israel and Iran. Equity markets reacted only modestly last month, suggesting that investors remained cautious and awaited greater clarity on the direction of the conflict. The ceasefire helped markets regain momentum, and by the end of June, the US equity market reached a new all-time high. The Swedish krona weakened slightly, which had a positive impact on foreign currency investments.
Global equities performed strongly in June, driven primarily by gains in the US equity market. The rally in US equities benefited the global equity portfolio, which has a higher allocation to technology and US equities compared to its benchmark index*. Within global equities, the portfolio is overweight US and European equities and underweight Asian and emerging market equities. At the sector level, we maintain an overweight in cyclical industrial companies and an underweight in healthcare.
Swedish equities were relatively volatile in June but ended the month roughly flat. Relative to its benchmark index**, the Swedish equity portfolio performed strongly, with both the small-cap and real estate funds delivering significantly higher returns than the broader market. A key driver of this was falling interest rates following the Riksbank’s latest rate cut. Industrial and financial companies remain the largest holdings in absolute terms, though they are underweighted relative to the benchmark, while real estate companies represent the largest overweight. The portfolio continues to hold a significantly higher share of small-cap stocks than the benchmark, which positions it well to benefit from strong small-cap performance.
The fixed income portfolio saw strong performance from its higher-risk investments in high yield and emerging market bonds. As a result, the fixed income portfolio delivered positive returns both in absolute terms and relative to its benchmark***. We continue to favor a fixed income portfolio with relatively high exposure to corporate bonds, as yields remain attractive across both investment grade (IG) and high yield (HY) segments. At present, we assess the risk of credit losses as limited, which supports the potential for attractive risk-adjusted returns going forward.
* Solactive ISS ESG Screened Paris Aligned Global Markets Index NTR
** Solactive ISS ESG Screened Select Sweden Index CNTR
*** OMRX Treasury Bill Index, HMNI Swe All Mortgage Dur Const 2.5Y, HMNI Swe All Government Dur Const 6Y