EN 
SE 
In January, we experienced both downs and ups. The month opened with a decline, but the fund's structure ensured robust resilience against these downturns. In mid-January, the market began to recover, with the real estate and technology sectors leading the recovery. The fund's broad focus on all sectors contributes to smoother fluctuations and a more controlled risk. However, this means that the fund does not always follow upwards at the same pace as some sectors do during the recovery. The fund's A class fell by 2.29%, which was still 0.51% better than its benchmark index.
The largest positive contributors during the period were Hansa Biopharma, ITAB Shop Concept, Softronic, Norva24 Group, MedCap and Vestum. These six stocks received capital allocation in early January due to their long-term trend. Several of these companies have scalable business models with the potential for continued strong growth.
The fund's strategy of favoring companies with low volatility and a clear trend has proven successful. For example, Softronic stands out with an impressive trend and volatility of only 28.84%, compared to the average of 44.5% in well-known small cap indices.
The continued low level of long-term interest rates compared to short-term interest rates signals a market expectation of interest rate cuts, something that the central banks have also begun to signal cautiously. When the interest rate cuts happen, many small companies are expected to recover strongly. With today's high financing costs and yield requirements, many small companies are undervalued.
Now is an excellent time to invest in small-caps, which have historically outperformed large-caps over time, despite lagging in recent years. This gap is now expected to begin to narrow. Statistically speaking, small companies always recover better than large companies after a so-called "bear market". This pattern was confirmed during the performance of the index in Q3 2023 and is expected to continue in 2024 even though January was a weak month for small caps.
Did you know that?
An equal-weighted index overtime performs better than a value-weighted index.
#The small company effect
Small companies have long-term yielded higher returns than large companies, Rolf Banz published the first evidence in 1981 and the phenomenon still applies today, even if large companies in certain periods have given higher returns. The most recent was the period 2021 – 2023, but since October 2023 we see that small companies have performed significantly higher returns compared to large companies.
Read more: Rolf Banz (1981) examines the empirical relationship between returns and the total market value of NYSE stocks between 1936 and 1975. He finds that smaller firms (small capitalization firms) have higher risk-adjusted returns than larger firms on average.