Fund performance was positive during Q1 and the fund rose just over 5% in SEK, driven by increased optimism about the economy. Small caps as a group, however, continued to rise less in value than large caps in Europe.
The megatrends in Europe from 2023 continued during the quarter. Active funds saw outflows on a broad front, while passive funds took market shares, which fueled the impact of larger companies outperforming smaller companies. Small caps thereby currently have a more attractive relative valuation than previously and we note that it is unusual from a historical perspective that small caps underperform large caps over such a long period.
The fund has gradually increased its exposure to both larger equities in our investment universe that have the drivers we have identified, as well as in equities that take advantage of lower interest rates, such as real estate equities and strong companies with higher profit multipliers.
Several of the larger positions in Beazley, TIG, Marlowe, Bakkafrost, Indivior, CTP, Demant, Erste Bank and Biogaia were the strongest contributors to returns, while HelloFresh, CVS Group, Embracer, Soitec, AC Immune, Pets at Home, Verbio and SeSa were among the weaker contributors.
During the period the fund added companies such as Accor, Bawag, Brembo, Do & Co, Exclusive Networks, Fortnox, JD Sports, MTG, Platzer, Publicis, Redcare Pharmacy, VAT Group and Össur. The purchases were financed by holdings in Alk-Abello, Bravida, Duni, Essity, Glanbia, HelloFresh, Keywords Studios, Qiagen, Rovi and Ubisoft.
The thematic drivers that we have identified remain relevant and we are beginning to see an increasing number of practical examples from companies related to the usage of AI for driving sales and efficiencies, which is an exciting prospect.