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This year, American defense companies have not performed so strongly, but in connection with European defense companies performing strongly and the cyber security sector being extremely strong, and responsible for a strong recovery, the fund has returned well. During 2022 and the first half of 2023, the geopolitical risk has been focused mainly on Ukraine and with concerns about the development in Taiwan, but we are now seeing how the geopolitical risks are spreading, now also to the Middle East and the Indo Pacific. US generals are already warning that the US defense does not have the capacity to have a sufficient presence in both Europe, the Middle East and the Indo Pacific region. Both in terms of exports and in terms of own defense appropriations, American defense companies will be well positioned against global increased defense appropriations.
The fund has a fundamental advantage by allocating to megatrends, i.e. growth that is stronger than the market as a whole. The trends have existed for a long time, but we now see it even more clearly through increased geopolitical risk. It is a long-term structural trend primarily against the background of regional totalitarian regimes challenging the rule-governed democratic world and current world order. The direction is clear over time, larger defense allocations are required in the West and this includes total defense and infrastructure where cyber security and space are central.
The composition of the portfolio allows us to benefit from both growth and value, and regardless of the return between them, the entire portfolio is exposed to megatrends that we believe will be relevant for at least a decade to come, probably even longer. 2023 was a year of strong recovery for the NASDAQ, with the NASDAQ 100 having its best year since 1999. The fund's top performing holdings for the year were NASDAQ-listed Crowdstrike, +142 %, and Palo Alto, +111 %, both market leaders in cybersecurity. RTX (formerly Raytheon) and Northrop Grumman had the weakest development, minus 16 % and 14 % respectively.
However, both companies are well positioned going forward and are among the companies that receive the most orders where, for example, the RTX air defense system Patriot is widely demanded and in large volumes, including from Japan. The Financial Times reported the other day that orders are pouring in at a rate unparalleled in modern times. The article also mentions British BAE Systems, in which the fund has a key position. BAE Systems is the owner of many Swedish defense companies, including Hägglunds and Bofors.
The strong conditions for the defense companies are ahead of us and not behind us, as are the opportunities for us investors
Outlook for the Defense Sector before 2024
It can be easy to breathe a sigh of relief after global equity markets finished off a real rally following the dovish FED interest rate announcement in December. We had a challenging Q3 behind us and a long period of high inflation and uncertainty around economic development and risks of recession on a global level. If we now receive negative signals and, for example, that inflation returns, there could quickly be a new downward price adjustment in the stock market.
There is a consensus that politics and geopolitics will have a much greater impact in 2024 than in 2023. We see how Huthir rebels, on indirect instruction from Iran, are trying to disrupt the important trade route in the Red Sea which can have a major impact on global trade and delayed supply chains.
We have an incredibly important election year ahead of us in 2024 and above all in the USA, when a Trump victory could have very negative effects on the global world order and also on democracy in the USA. Democracy's position is under clear pressure as more than 50 % of the world's population go to the polls during the year. The election countries together make up more than 65 % of global GDP. The 8 most populous countries go to the polls and they are absolute key countries such as India, Indonesia, Brazil and the aforementioned USA.
Taking geopolitical risk into account when investing is likely to be key in 2024 as well.