The eventful weeks of the Trump administration\u2019s foreign policy, with the Ukraine issue at the center, have clearly increased geopolitical risks and affected the European security order. The Global Security Fund had a strong return of 6.79 % in February, mainly driven by the fact that European countries are expected to significantly increase their defense spending. Trump\u2019s statements that Europe lacks the strength to support Ukraine without the US have prompted the EU to show unity and react forcefully. European Commission President Ursula von der Leyen presented the \u201cReArm Europe\u201d plan, which includes up to 800 billion euros to strengthen Europe\u2019s defense capabilities and reduce dependence on the US. In addition, EU finance ministers are discussing the possibility of financing defense spending through joint loans, using existing EU funds and involving the European Investment Bank. Overall, Trump\u2019s stance on Ukraine and Russia has acted as a catalyst for Europe to reassess and strengthen its own defense budgets and strategies to ensure the continent\u2019s security and independence. It also resonates throughout the Pacific region, where countries do not want to be too dependent on the US and will also need to strengthen their defense budgets. There are good opportunities here for European companies.<\/p>\n\n\n\n
The US is also considered to be underinvested in defense based on geopolitical developments, particularly in the Middle East and the Pacific region. Despite this, the development of US stocks has been less positive in both defense and cybersecurity. This is mainly due to the uncertainty surrounding President Trump's policies and potential cuts in the US defense budget and a reallocation of resources to streamline defense spending. Although valuations in the US are starting to look interesting, the fund has been consistently overweight Europe and is taking increasing exposure to the Pacific region.<\/p>\n\n\n\n Company-specific news<\/strong><\/p>\n\n\n\n Our largest holding that has been in focus for us in recent months is Rheinmetall. Rheinmetall has already received around 50% of the orders from Germany's \u20ac100 billion special defense fund, significantly more than the initially expected 30\u201340%. This is mainly because the company has production capacity and manufactures exactly what Europe needs most urgently: ammunition, tanks, air defense systems and drones. With increased investments in European defense, the company's share of NATO members' defense budgets is expected to increase from 3% to between 7\u20139%. Rheinmetall's order backlog is expected to rise from \u20ac21.98 billion to \u20ac32.10 billion in 2024. The company's fourth-quarter report for 2024 will be published later in March. We also see similar developments for other large European defense companies in the portfolio such as Leonardo and Thales.<\/p>\n\n\n\n South Korea is expected to become an important ally for Europe going forward based on their production capacity, established supply chains and a strategy to reduce dependence on the US. South Korean defense companies benefit from Europe's increasing military investments and we have recently seen several large contracts and export deals with Poland and other European countries. As a result, the fund has gradually increased its exposure to South Korean defense companies.<\/p>\n\n\n\nJanuary 2025 \u2013 Highest Development<\/strong><\/td> January 2025 \u2013 Lowest Development<\/strong><\/td><\/tr> Clavister<\/td> 46,41%<\/td> Booz Allen Hamilton<\/td> -17,78 %<\/td><\/tr> Hanwha Aerospace<\/td> 43,31%<\/td> AeroVironment <\/td> -16,95 %<\/td><\/tr> Rheinmetall<\/td> 38,95%<\/td> CACI International <\/td> -13,31 %<\/td><\/tr> Hensoldt<\/td> 34,99%<\/td> SAIC <\/td> -8,76 %<\/td><\/tr> Saab<\/td> 32,90%<\/td> Leidos <\/td> -8,49%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n