Arctic Norwegian Value Creation Monthly Report April 2019
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) increased by 1.9% in April. Since incep on in August 2014, the fund has returned 76%, compared to 46% for the OSEFX index. The largest contributors to fund performance in April were Elkem, Yara Interna onal and Storebrand. Despite de- clining product prices in most segments, Elkem reported a reasonably strong Q1-19. Lower costs and specialisa on efforts partly compensated for lower market prices, while the company reiterated the target of NOK 500 mill. profitability improvement with full effect already in 2019. Yara benefi ed from increasing urea and fer liser prices, while a sharp decline in European gas prices this year is providing cost relief. Moreover, during its quarterly call, management indicated increasing nitrate demand in Europe into the second quarter. The share price of Storebrand increased, likely due to an overall posi ve development in the equity market and a 12 bps increase in the Norwe- gian five year swap rate. The most nega ve contribu ons to fund performance last month came from Schibsted, Aker BP and Aker ASA. Schibsted partly spun off ownership in its non-Nordic marketplaces into Adevinta. Schibsted’s shareholders got one Adevinta share for each Schibsted share, while Schibsted placed 5.7% of Adevinta in the market. Schibsted is retain- ing 59.3% ownership of the new company. We believe some investors have swapped from the diversified Schibsted to the pure play Adevinta. Aker BP reported somewhat higher Q1-19 costs than expected, while crude prices fell back towards month end. Aker ASA declined in tandem with weak performance by its main investment, Aker BP. Addi onally, Aker Energy’s update on the appraisal drilling outside Ghana indicates less upside than previously as- sumed. Year to date, Elkem, Aker BP and Aker ASA have been the largest posi ve contributors to fund performance, while Lerøy Seafood, Norsk Hydro and Veidekke have been the largest detractors. Adevinta entered the fund. In addi on to shares spun-off from Schibsted, we subscribed for addi onal Adevinta- shares in the placement. Moreover, Copenhagen-listed Maersk Drilling, the dominant jack-up rig drilling operator on the Norwegian Con nental Shelf, entered the fund. We increased our holdings in Mowi and Lerøy. All of our shares in Oslo Børs VPS Holding were divested. We reduced our posi on in Transocean significantly. At the end of the month, the por olio was valued at 14.2 mes earnings (12 m fwd) and 1.6 mes book equity. Corresponding figures for the Norwegian market were 15.2 and 1.8, respec vely. Oslo, May 2019 Sindre Sørbye Ole E. Dahl Tore Mengshoel Thomas Rasmussen Por olio Manager Por olio Manager Por olio Manager Analyst
ABOUT THE FUND Arc c Norwegian Value Crea on is research driven and truly index-independent UCITS fund. The investment process focus on iden fying companies which are considered to be value-crea ng over me at a reasonable price. The por olio is con- structed by bo om up stock picking. There are no constraints regarding sectors and the goal is to achieve the best possible long-term risk-adjusted return. The funds benchmark is Oslo Stock Exchange Mutual Fund Index (OSEFX).
20% 16.0 % 14.3 % 15% 12.6 % 12.9 % 10.7 % 10% 7.8 % 8.5 %
5% 3.4 % 1.9 % 1.9 %
0% Month YTD 12m 36m p.a. 60m p.a. Incep. p.a. Arctic Norwegian Value Crea tion II Class B (25/8‐14) OSEFX FUND COMPOSITION END OF MONTH
Real Estate 0.5% 10 largest positions Energy 18.3% Kongsberg Gruppen ASA 4.6 % Aker ASA 4.0 % Industrials 9.7% Aker BP ASA 4.4 % Elkem ASA 4.0 % Health Care 0.0% Lerøy Seafood Group 4.2 % Europris ASA 3.8 % Consumer Discretionary 6.5% Yara International ASA 4.1 % Gjensidige Forsikring AS 3.4 % Materials 11.5% Telenor ASA 4.0 % DNB Bank ASA 3.2 % Information Technology 5.9% Financials 21.9% 5 largest overweights +/‐ 5 largest underweights +/‐ Consumer Staples 13.8% Elkem ASA 4.0 % Equinor ASA -8.9 % Telecommunication Services 4.0% Kongsberg Gruppen 3.6 % DNB ASA -5.8 % Utilities 1.4% Europris ASA 3.4 % Mowi ASA -5.7 % Sbanken ASA 2.7 % Telenor -5.2 % 0% 5% 10% 15% 20% 25% Aker 2.5 % Orkla -4.5 %
FUND PERFORMANCE AND RISK FIGURES —CLASS B NOK (FORMER CLASS A)
3 6 Since Month months months YTD 1 year 3 years launch Fund 1.9 % 7.2 % 6.3 % 14.3 % 7.8 % 56.2 % 76.7 % Benchmark 1.9 % 5.8 % -0.2 % 10.7 % 3.4 % 42.9 % 46.5 % Difference -0.1 % 1.4 % 6.4 % 3.5 % 4.4 % 13.2 % 30.2 % Vinx Nordic Net, NOK 2.9 % 8.4 % 9.8 % 11.9 % 7.1 % 30.1 % 64.0 % Euro Stoxx 600, EUR 3.8 % 10.3 % 9.8 % 17.3 % 4.5 % 24.6 % 30.4 % S&P 500 TR, USD 4.0 % 9.5 % 9.8 % 18.2 % 13.5 % 51.6 % 62.3 % MSCI AC World, LC 3.6 % 8.5 % 9.4 % 16.3 % 7.5 % 41.3 % 44.4 %
5 top contribut. Fund Fund Contri‐ 5 bottom contribut. Fund Fund Contri‐ year to date weight return bution year to date weight return bution Elkem Asa 3.6 % 60.4 % 1.82 % Leroy Seafood Group 3.5 % -5.5 % -0.20 % Aker Bp Asa 5.0 % 32.7 % 1.54 % Veidekke Asa 1.7 % -0.5 % -0.04 % Aker Asa-A Shares 3.9 % 32.4 % 1.01 % Norsk Hydro Asa 1.1 % -5.7 % -0.03 % Bonheur Asa 2.3 % 48.0 % 0.97 % Fjord1 Asa 1.6 % -2.3 % -0.03 % Gjensidige Forsikrin 3.3 % 29.8 % 0.91 % Drilling Co Of 1972/ 0.1 % -0.4 % -0.01 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.8 % 1.4 4.2 % 0.8 Benchmark 9.8 % 1.2 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2019 6.64 % 4.75 % 0.42 % 1.88 % 14.28 % 2018 -0.75 % -0.84 % -0.69 % 6.85 % 4.70 % -0.03 % 0.80 % 2.02 % 1.70 % -7.32 % -0.19 % -6.84 % -1.47 % 2017 1.70 % 0.29 % -2.35 % 4.19 % 0.70 % -0.07 % 3.81 % -0.48 % 4.53 % 3.17 % -2.03 % 3.09 % 17.51 % 2016 -7.33 % 2.60 % 2.10 % 4.08 % 3.70 % -3.14 % 3.81 % 1.29 % 1.71 % 3.60 % 1.99 % 3.96 % 19.23 % 2015 4.66 % -1.15 % 1.42 % 3.48 % 0.13 % -2.25 % 1.62 % -5.13 % -1.22 % 3.68 % 4.05 % -0.76 % 8.34 % 2014 0.44 % 0.28 % -0.88 % 1.49 % 2.05 % 3.39 %
Disclaimer: Historical returns are no guarantee for future returns. Future 100.0 % returns will depend, inter alia, on market developments, the fund man‐ ager’s skill, the fund’s risk profile and subscrip on and management fees. 80.0 % The return may become nega ve as a result of nega ve price develop‐
60.0 % ments. Arc c Fund Management AS seeks to the best of its ability to ensure that all informa on given in this report is correct, however, makes reserva‐ 40.0 % ons regarding possible errors and omissions. Statements in the report reflect the por olio managers’ viewpoint at a given me, and this view‐ 20.0 % point may be changed without no ce. The report should not be perceived as an offer or recommenda on to buy or sell financial instruments. Arc c 0.0 % Fund Management AS does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. -20.0 % Employees of Arc c Fund Management AS may be owners of securi es 08/14 01/15 06/15 11/15 04/16 09/16 02/17 07/17 12/17 05/18 10/18 03/19 issued by companies that are either referred to in this rapport or are part of Arctic Norwegian Value Creation Class B (Start 22.08.14) OSEFX the fund's por olio.