Global Security Fund månadsrapport – september 2023

Global Security Fund Monthly Report – September 2023

During September, the fund recorded a decline of 5.3 percent.

The fund still has the largest exposure to the American stock market, where there was negative sentiment and strong negative movements in the market during the month.

On September 15, US long-term interest rates began to rise sharply after the FED began to communicate that the interest rate will be "Higher for Longer". It was repeated at the Fed's press conference on September 20, and in addition, two previously announced cuts were removed next year. In reality, the FED raised long-term interest rates instead of raising the policy rate.. The FED looks worryingly at strong jobs data and that growth has exceeded expectations. The US economy is resilient and the FED worries that inflation will bite as a result.

The fear of rising interest rates affected the US market to a large extent during September and also had a global impact. The consequence was that all sectors, except energy, went down by between 3 % and 7.5 % in the US during the month. In the fund, only four holdings showed a positive return. The difficult share climate during September is made clear by the relevant comparative indices below. These are partly broad stock market indices, partly indices for the fund's selected segments; defense and cyber security.

Global Security Fund -5,31%
MSCI World TR -3,56%
MSCI World IT TR -6,27%
Nasdaq -5,51%
OMX30 -1,28%
iShares US Aerospace & Defense ETF -8,78%
First Trust Nasdaq Cybersecurity ETF -4,56%


​The holdings that were up for the month were Crowdstrike (2.67 %), Northrop Grumman (1.64 %), Intel (1.17 %) and Kongsberg Group (0.09 %). The biggest negative contributors were Raytheon (-16.35 %), Boeing (-14.44 %), Science Applications (-10.30 %). Raytheon and Boeing are down in part because expectations for commercial aviation and demand have fallen.

Rising geopolitical concerns justify higher valuations for defense companies
The escalating conflict in the Middle East has once again brought defense companies into the focus of investors. As a direct consequence of the Hamas attack on Israel, subcontractors to the defense industry rose sharply during the beginning of October. However, it follows a generally weak period for these companies' shares, where the valuations hardly look challenging if you look at it from a historical perspective.

The major US defense companies trade at about 14 times expected 2024 earnings, which is lower than the historical average of about 17 times. As trustees, we do not think it reflects the opportunities in the sector. The long-term trend is towards increased defense appropriations and investments in the sector. The concern that we previously saw in Ukraine and now in Israel definitely speaks to the fact that that trend is intact. It should therefore be more reasonable that these companies trade at a premium compared to historical averages.

However, an investment in the defense sector should not be seen as an investment in human suffering, rather as a way to contribute to societies being able to proactively build a sustainable society. A well-functioning defense is crucial in this context.

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