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The Global Security Fund was up 2.5 % for the month following strong contributions from the cyber security sector benefiting from the AI trend. The cyber security sector and especially growth companies within the sector are characterized by high volatility in terms of growth changes, conditions for profitability, market shares and the impact of recession and interest rates. Palo Alto is the company that developed the strongest for the year up 60 % together with Crowdstrike 43 % and Fortinet 41 %.
Defense companies have had a negative development during the month of May and have been characterized by the uncertainty surrounding the debt ceiling in the US and the fact that the US was close to being insolvent for a period, although at the same time it only served as an obvious and useful deadline to reach an agreement between Democrats and Republicans. The agreement means that the budget is kept intact at the same level but that defense spending is allowed to increase. The defense industry is also described as the big winner in the budget settlement and it is clear in the way the defense budget is formulated and justified that it is a direct response to the rearmament China is doing and their actions in the geopolitical arena and above all in the South China Sea.
At a time when the outside world has high expectations for the US to take a clear role in world politics and security order, it is an important signal that the US is increasing defense funding and a positive for US defense companies. It is also positive for the companies and the fund that Japan and South Korea are increasing their defense budgets. Their imports are mainly from the USA, so we expect that positions in American defense companies will be characterized by good growth and positive guidance going forward.
We believe that the fund's composition of defence, space and cyber security is a good composition going forward as well. Cyber security will be important both for the changing security order and for the blurring of previously respected borders and the number of attacks, industrial espionage and sabotage will only increase. At the same time, there are recession expectations and concerns in the market and then Tech as a sector can be affected and also drag cyber security with it as a result. We consider the long-term trend in cyber security indisputable and something investors should be positioned against over time. It is clear that cybersecurity also has a natural and important part in AI development and implementation for scalability and impact.
Defense is a standout sector that is more resilient to recession and inflation and with a strong uptick in Tech 2023, but particularly explosive in AI and The Seven, investors likely need to be prepared for a rebound in development. Driving S&P500 returns for the year have been Apple, Alphabet (Google), Meta Platforms (Facebook), Microsoft Corp, NVIDIA Corp, Amazon, and Tesla. Geopolitical risk is normally negative for the stock market but positive for the defense sector.
Since January 1, 2023, the fund has lowered its fees, which will be visible on platforms such as Nordnet and Avanza shortly. The fund is working hard to lower the fees further partly through volume growth, partly because the fund company continues to take a significant part of the costs. Lower costs will benefit return expectations going forward as well.
The fund is now submitting an application to be categorized as a light green fund, Article 8 and has been working for some time now according to the regulations in analysis, transparency and risk management regarding sustainability risks. We believe that a categorization as an Article 8 fund will further increase interest in the fund and lead to volume growth and thus also lower costs.
The fund has more exciting news in the works and will communicate them on an ongoing basis as it becomes clear.