An extraordinary year
The fund rose 2.4 percent in December. Stock markets performed well as the US and China seemed to make progress in agreeing trade terms. The likelihood of a reasonably ordered Brexit also improved with Tory success in parliamentary elections.
The Swedish Riksbank raised its policy rate to zero, as expected, which certainly helped to strengthen the krona. Despite this, or perhaps because of it, the Swedish stock market was one of the best in recent months. Emerging markets have been strong. The corporate bond market was upbeat, with somewhat reduced spreads, but long-term rates are starting to move upward. Commodity prices also rose this month. All the signs therefore suggest that markets are priced for an economic upturn in 2020.
The fund’s return for full-year 2019 was 27.2 percent, which is extraordinary for a mixed fund based on a fifty-fifty distribution between equities and corporate bonds over time. One explanation is that the equity share has been closer to 60 percent. Another is good stock picking, with Lifco and Holmen as particular stand-outs. Furthermore, a relatively high level of risk in the bond component has paid off. In fact, we have to go back to 2009 to find higher returns.
Norwegian real estate company Entra is a new shareholding. The investment was made when the controlling owner, the Norwegian government, reduced its stake by almost 15 percent. The company owns a portfolio of commercial properties in large Norwegian cities. Norwegian property prices have not risen to the same extent as in Sweden, and Entra’s valuation is somewhat lower than Swedish counterparts. The fund also upped its stakes in Securitas and Volvo.
The fund participated in new bond issues from Finnish Ahlström-Munksjö, which produces innovative fibre-based products, Norwegian Cegal, which supplies cloud-based technology to the oil industry, and Assemblin, which offers installation and services in the Nordics. Since investor deposits have far exceeded sales, it has been possible to finance purchases of both shares and bonds without selling securities.