Market

2021 turned out to be yet another strong year for world equity markets, albeit with significant regional differences; The US had the highest return, with the S&P 500 returning 28,7%, whilst Asia lagged the other regions and posted a negative return of 2,9% for the year. The decline was due to weak Chinese equity markets on the back of fears for weakening growth, concerns about the Chinese real estate market as well as increased regulation of several sectors like education, e-commerce, fintech and social media. India defied the higher oil price and pandemic and posted a strong return of 26% for the year. Higher inflation and interest rates expectations were ongoing topics throughout the year, and lead to varying dispersion between growth and value stocks. Growth stocks rebounded after a weak first half and finished the year only slightly behind value stocks. From the end of November however, high multiple growth stocks, and particularly the unprofitable ones, underperformed strongly.

The oil price rose 50% in 2021, and energy was the best sector on a global basis, rising 36,5%, and lead to a good year for the Oslo Stock Exchange, which rose 23,4%. IT was the second-best sector (+29%), followed by financials (25%). Consumer cyclical and staples were weaker sectors, returning 17,9% and 13,1% respectively.

Following the extraordinarily strong performance for green stocks in 2020, the Wilderhill New Energy Global Innovation index peaked in mid-February and fell thereafter ending 2021 down 22%. It was companies within hydrogen as well as companies in the wind and solar value chain that had a particularly weak year.

Activity and results

The business area had a total return of 11,1% (USD).

As of 2021, Global Equity has become a pure long-only mandate investing in equity mutual funds that complement Ferd’s direct investments. Global Fund Opportunities comprises fund investments of a less liquid character, and that offer attractive absolute return prospect at a lower correlation to global equity markets than Global Equity.

The fourth theme in Global Equity, technology, was established in early 2021 and now comprises the four themes Asia, which at the end of 2021 constituted 43% of the mandate’s capital, US Centric (23%), technology (7%) and the green shift (26%).

Global equity had a return of 9,7% for the year, 0,6% ahead of its benchmark index. The large allocation to Asia detracted to the absolute return for the mandate, but the relative performance within this theme was strong. US Centric had the highest return, even though the managers underperformed their benchmark indices. Within technology, return dispersion between the two managers was high, illustrating the different investment approach of the two managers. The green shift comprises three funds, of which one broader climate fund and two funds focusing purely on the energy transition theme. The two latter ones did particularly well compared to their peers, as one could observe substantial corrections in the share price of companies that had strong performance in 2020. As our managers are more valuation conscious than many of their peers, these companies were less present in the portfolios of our managers.

Global Fund Opportunities returned 13,1%. After a strong 2020, the mandate’s liquid equity related investments had a weak year, whilst the multistrategy investments had yet another strong year. Among the illiquid funds, the Europan and US focused investments contributed the most to performance.

Allocations

2021 was an active year for the business area. On the back of the Elopak IPO in June, it was decided to allocate 2 billion NOK of the proceeds to Global Equity. The capital was allocated across the four themes in Global Equity based on an overall assessment of Ferd’s total investment portfolio and the themes’ long-term attractiveness.

Within Global Fund Opportunities, a total of 53 MNOK was drawn, and distributions amounted to 57 MNOK, implying a net distribution of 4 MNOK to Ferd. No new commitments were made during 2021.

At the end of 2021, assets under management were 7,3 billion NOK, of which 4,1 billion in Global Equity and 3,2 billion in Global Fund Opportunities and was split among 17 different fund managers.