Market situation

After a challenging year for global equity markets in 2022, where the MSCI World index fell 18.3 percent, world equity markets had a solid year in 2023, returning 23.8 percent. Over the two years combined, global equity markets are up 1.3 percent. Three important themes drove the markets during the year: Artificial Intelligence (AI), interest rates and China. 

The year kicked off with optimism around the reopening of China, and Chinese equity markets peaked toward the end of January, being up 17.2 percent, while the US market (the S&P500) rose 6.2 percent. Nevertheless, these two markets would end the year in opposite directions.  

Both the collapse of the US bank SVB and Credit Suisse, which was subsequently bought by UBS, turned out to be small bumps in the road as AI turned out to be the big theme throughout the year. The launch of Chat GPT from OpenAI towards the end of 2022 was quickly adopted by the leading digital companies in the US. Microsoft’s investment into OpenAI and the launch of their own “Copilot” as well as the massive increase in the sales of Nvidia’s graphics processing units were seen as important validations of the technology. This drove the stock prices of the technology giants Microsoft, Apple, Amazon, Meta, Tesla, Google, and Nvidia an average of 87 percent higher in 2023, and these seven companies accounted for more than 9 percent of the MSCI World Index return for the year.   

At the beginning of the year, the market anticipated a recession in the US economy, but surprisingly strong economic data changed the view to an expectation that rates would be higher for longer. As a result, the US 10-year interest rates rose to almost 5 percent in October, before the market participants changed their view and anticipated that peak interest rates had been reached, and that 2024 would be a year with a number of interest rate cuts. Interest rates fell sharply during the last two months of the year, which lead to a strong finish to the year for stocks, and growth stocks in particular. The Nasdaq Composite index finished the year with a return of 44.7 percent.  

Meanwhile in China, economic activity failed to gain traction after the reopening. The challenges in the real estate sector combined with weak domestic consumption and export numbers contributed to a weak year for the Chinese Equity market, which fell 11.2 percent.  

Elsewhere in Asia, the equity markets in India, Korea, and Taiwan had a good year, which took the broad MSCI Asia Pacific ex Japan index to a return of 7.4 percent for the year.  

Despite the oil price falling 10.3 percent, the Oslo Stock Exchange rose 9.9 percent. Due to an unexpected interest rate hike by the Norwegian Central Bank in December, the Norwegian Krone strengthened 6.3 percent in December, ending the year 3.6 percent weaker against the US Dollar. The NOK weakened by 6.5 percent vs the Euro in 2023.  

Activity and results

The business area had a return of 12.4 percent (USD) in 2023. Due to the weakening of the Norwegian Krone, the return in NOK was 16.5 percent.  

The business area manages two mandates, Global Equity and Global Fund Opportunities. The purpose of the Global Equity Mandate is to invest in attractive markets through long-only equity funds that complement Ferd’s direct investments. The mandate consists of four themes; the Green Shift, which at the end of 2023 constituted 30 percent of the mandate’s assets under management, US Centric (25 percent), Asia (29 percent) and Technology (16 percent).  

Global Equity returned 14.1 percent, and there was significant return dispersion among the four themes. Technology had by far the highest return (47.3 percent), with companies geared toward the AI theme having an extraordinarily strong year. The growth-oriented US Centric theme rose 25.8 percent, led by stocks linked to the progress within GLP-1 weight loss drugs and the AI theme. 

Through our managers in the Green Shift, we are invested in companies that provide solutions for the energy transition to a lower-carbon society and renewable energy production. The theme also invests in solutions outside the energy sector such as water, the circular economy and pollution. It was a volatile year for the three funds, driven by more interest-sensitive stocks such as producers and developers of renewable energy, including the solar value chain. After being in negative territory for the year as of the end of October, the theme rose 24 percent during the last two months, ending 2023 with a return of 10.2 percent. Within Asia, there was significant return dispersion between countries. While the Indian stock market rose over 20 percent, the Chinese market fell by over 10 percent. The Asia theme ended the year with a modest return of 1.9 percent, and the weak performance of consumer-related stocks in China was the most notable detractor.  

Global Fund Opportunities consists of fund investments that offer attractive absolute return and which deploy investment strategies that have a lower correlation to the development in the equity market than our long-only equity funds. The mandate returned 10.3 percent (USD) in 2023. The liquid investments rose 11.8 percent, with solid contribution from the two multi-strategy funds. Our American equity manager returned 14 percent. The illiquid investments returned 8.9 percent, primarily driven by our US-focused manager.  

Allocations

Net cash flow for the year amounted to minus NOK 881 million, of which NOK 494 million was allocated out of the Global Equity mandate in January. Within Global Fund Opportunities, net proceeds from the liquid funds amounted to NOK 428 million, both due to a redemption and profit distribution from two of the funds. Drawdowns from the illiquid funds amounted to NOK 41 million. 

At the end of 2023, assets under management were NOK 7.5 billion, of which NOK 4.2 billion in Global Equity and NOK 3.3 billion in Global Fund Opportunities, managed by 15 different fund managers.