Fund performance was positive during Q1 and the fund rose just over 9% in SEK. The upturn in the equity market was driven by an increased confidence in a soft landing of the economy that is supported by expected rate cuts.
Holdings in Novo Nordisk, Netcompany, Volvo, Mycronic and Beijer Ref were the strongest contributors to fund returns and all delivered strong reports for Q4. Nibe and Sweco, which were weighed down by weaker than expected reports, had the most negative impact on returns. Nibe’s sales were negatively affected by the persistently high inventories of heating pumps in the distribution chain that were accumulated during a period of high expectations for further strong growth and the need to ensure delivery capacity. Declining gas prices in Europe and lower subsidies have dampened incentives for installing heating pumps. The inventory situation should be rebalanced during the end of the year and there is a further need for energy transition that is assisted by effective climate solutions over the long term. Sweco was weighed down by struggles in the UK market where projects within transport are being cancelled and the company is now adjusting after the overcapacity that arose.
A new holding in SEB was added to the fund during the quarter. SEB is a high-yield and well-capitalized bank with a broad revenue base that will be important when the upcoming rate cuts by the Riksbank begin to negatively impact the bank’s net income. We increased the holdings in Nibe during the period. The fund decreased the holding in SHB, which is more dependent on the net income in its revenues and also decreased holdings in Novonesis and Volvo after strong share price performance.
For the upcoming reporting period we will continue to focus on companies that have sustainable business models and competitive offers with sustainable growth even in a weaker economy.