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Exelity once again parries a negative stock market month well and closes December at +2.7%. This at the same time as various large and small cap indices were listed down during the month, e.g. OMX SPI -1.1%. This means that Exelity ends at +26% for the full year 2024 (+27% in 2023), which can be compared to OMX SPI at +6%, First North -2% and OMX Small Cap -10%. Although Exelity does not have a relevant benchmark given its unique profile, it is worth mentioning how the stock market has performed in general. Our goal is to deliver an absolute return instead of at least 10% per year, which has been achieved by a good margin in recent years. When we summarize 2024, we can also note that just over half of the return comes from the transaction leg (bridge loans and guarantees), and the other half from the equity leg (listed shareholdings).
Volatility remains low, around 4% for the full year 2024, with a Sharpe ratio around 3.70. This with only one negative return month during the year (August -1.0%), and as many since I took over the fund in the fall of 2023.
During December, the transaction leg continued to perform strongly, but the equity leg also outperformed the underlying equity index. During December, two new guarantees were signed, and Exelity thus has eight guarantees outstanding. The loan portfolio has been further expanded with two bridge loans, and corresponds to approximately 21% of NAV at the end of December. Exelity has continued to have zero defaults since inception, and approximately 2% of the fund is in reserves. The total guarantee payments from outstanding guarantees correspond to approximately 2% of NAV, which is expected to create continued stable income in the transaction leg in the near future.
The equity leg, which corresponds to approximately 73% of the fund, is noting a stronger development than the rest of the stock market, where we would especially like to highlight the name FreeTrailer which ended +20% for the month. Exelity still has no holdings in the portfolio that correspond to more than 10% of NAV, and can conclude that the equity development in the past year has been broad.
At the end of 2024, Exelity bought back Evolution, a stock the fund has essentially been out of since last summer. This follows several discussions with various experts in the UK and Asian markets, which confirm our view, where we believe the market is underestimating Asian growth in the medium term. We are not concerned about the license in the UK, and see good support for Latam now that Brazil is going live with its regulation. We see good risk/reward in 2025 at these levels – although we are somewhat concerned about how to guide the EBITDA margin.
I would also like to draw attention to the fact that the undersigned was featured and interviewed in FinVoices – an episode that can be found on Spotify under the name “Marlon Värnik: Who is the manager behind Exelity?” I talk a lot about Exelity and how we distinguish ourselves from other fund managers in our analysis and research, recommended.
I would like to take this opportunity to wish you continued success and all the best in 2025! Now we go
With kind regards,
Marlon Varnik