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Strong gains in European defense companies created 2.44 % returns in the fund for the month. The fund is now up 22.90 % for the year. SAAB (15.37 %) and Kongsberggruppen (14.69 %) did the most. New holdings such as Babcock International (11.43 %) and Rolls Royce (9.76 %) also performed well.
The entire sector has performed very strongly in recent years, while the stock market has been characterized by high risk. When the whole of Europe is so clearly behind Ukraine, it is surprising that we private individuals should not be able to invest in the sector in our occupational pensions.
European defense companies continue to be characterized by high volatility, but at the same time by good prospects through increased defense funding and expanded collaborations between European countries. In May, for example, a Nordic summit took place in Stockholm, led by Prime Minister Ulf Kristersson, the heads of government from the Nordic countries and German Chancellor Olaf Scholz discussed Nordic competitiveness and security. They signed a joint declaration to promote emerging technologies and green transitions, as well as to strengthen investment in the defense industry.
The armed forces have submitted their budget documents for 2025, focusing on strengthening brigades, air defense capabilities and training for conscripts and officers. The plan also includes increased interoperability with NATO and improved capability to handle unmanned vehicles. Commander-in-Chief Micael Bydén emphasizes the need for high flexibility in planning to meet the development of the outside world and uncertainties surrounding personnel recruitment and materiel acquisition.
Aid to Ukraine has been too slow and has had too low ambitions. Kaja Kallas, the Prime Minister of Estonia put it aptly in Aktuellt on June 6. Europe's strategy must be to win the war and show strength and deterrence, because that is the only language Russia understands. Just defending Ukraine so they don't lose is not a successful strategy. The signal value is also extremely important not only against Russia but also against China, Iran and North Korea. These are countries that want to establish spheres of interest where they can oppress surrounding smaller countries. The named countries support Russia financially and with materials, and the EU should be tougher against China in particular. The EU is an important trading partner for China, larger than the US, but Europe is continuously decreasing in importance and its prerequisite for making demands.
The EU countries' economies together are ten times larger than Russia's economy. Even the combined economies of the Nordic countries are larger than Russia. Support from Europe needs to come now and more extensively. The American support package for Ukraine has also increased the pressure on Europe, both formally and informally, that Europe needs to take a clearer responsibility for security and peace in Europe. It is speculated that a win for Trump could be negative for the defense sector and for Europe. Trump has made a couple of populist and sensational statements about how he wants to reduce aid to Europe and Ukraine and potentially pull the US back somewhat on the world political stage.
Regardless of the outcome, there is a consensus in the US Congress that Europe must take greater responsibility for Europe, especially when the US needs to put large resources into the relationship and with China and now also the Middle East. This positive for European defense companies over time and important for the fund which has continued more than 50 % exposure to European defense companies.
Cybersecurity had a weak month and the fund is now underweight to the sector at 15 % as of May 31. The fund considers that the current weighting is appropriate given the market situation, but sees good prospects for the sector with a high growth rate and high demand based on the geopolitical environment.