LHV Pensionifond Aktiivne III

November 2024: We increased the volume of our direct investment portfolio

Kristo Oidermaa and Romet Enok, Fund Managers

Following November’s “Trump rally”, December saw a slight pullback, with S&P 500 ending the month down 2.5% in dollar terms. By contrast, the Euro Stoxx 50 index rose by 1.9% in euro terms, while the Emerging Markets index was nearly flat, posting -0.3% in dollar terms. Among emerging markets, Brazil was the biggest decliner, but this was offset by China, which rose by 2.6% in dollar terms. The OMX Baltic Benchmark index also increased by 1.6% for the month.

In December, we added several new names to the portfolio, including ASML, Applied Industrial Technologies, Builders FirstSource, Old Dominion Freight Line and Novo Nordisk. We also increased our holdings in United Rentals and Valaris. The top contributors to returns for the month were the European banks index (+5.4%), Stora Enso (+6.8%), Metso Corporation (+7.85%) and Antero Resources (+7.2%). The largest detractors were the US industrial companies index, which fell by 10%, our gold-related positions (-6% to -12%), our energy metals holdings (-9% to -14%) and Novo Nordisk (-19%). Throughout the year, we have been steadily diversifying our portfolios, adding high-capital-efficiency companies that are market leaders in their niches across Scandinavia and the United States alongside cyclical commodity investments.

At the end of 2024, private equity funds were quite active. KJK Funds sold one of their largest investments, Don Don, a Balkan-based bakery chain, to Grupo Bimbo, a globally renowned Mexican baked-goods giant. Don Don, which began operations in 1994 in Slovenia, has steadily expanded into Croatia, Serbia, Bulgaria and several other European countries. The deal provided Grupo Bimbo with access to new markets.

In the bond portfolio, Citadele Bank announced to the stock exchange that it plans to redeem its subordinated bond issued in 2017 in January. This news fittingly concluded a year during which the fund exited several bond investments both in Estonia and across European markets.

November 2024: We increased the volume of our direct investment portfolio

Kristo Oidermaa and Romet Enok, Fund Managers

Donald Trump’s election victory spurred a strong rally in US indices, with the S&P 500 ending November up 5.7% in dollar terms. Meanwhile, the Euro Stoxx 50 index declined by 0.4% in euro terms during the month. The emerging market index fell by 3.7% in dollar terms, largely driven by a 4.4% drop in China. The OMX Baltic Benchmark index also fell by 3% over the month.

During the month, we increased existing positions and added new ones to our portfolios. Among the existing positions, we expanded our holdings in Epiroc, Atlas Copco, Glencore, a gold miners ETF, and a US industrial companies ETF. New investments added to the portfolios included the Latin American company Mercado Libre, Emcor Group, Investor AB, energy company EQT Corp, and a US infrastructure development ETF. In November, the strongest contributors to returns were our energy-related positions, which rose by 5% to 27%, and the US industrial companies ETF, which delivered approximately 11% returns in XL and 12.75% in A3. On the other hand, the most negative impacts came from one of our gold positions, which fell by approximately 9%, the European banks index, which declined by around 3.2%, and our energy metals position, which dropped by approximately 6.3%. We continue to see good opportunities in the commodity sector, given the protection it provides in a challenging geopolitical environment, as well as in Scandinavian companies due to their high quality and strong competitiveness. We have also increased our exposure to US stocks in recent months and intend to increase this exposure in the future.

In November, EfTEN Real Estate Fund 5, in partnership with six Estonian entrepreneurs, announced the acquisition of Tallinn’s Kristiine shopping centre, valued at €123.5 million. This marks the fund’s final investment. The centre spans 61,600 sq. m and houses 120 tenants, with the largest being Prisma and Apollo. The acquisition is financed through a combination of equity and a syndicated loan from SEB and Swedbank.

Last month, we expanded our direct investment portfolio by entering into a loan agreement with Eastnine, a real estate company primarily focused on the Lithuanian and Polish markets. The loan has a three-year term, and the pension fund earns an annual interest rate of 8.5%. At the same time, Eastnine also raised new equity and secured bank loans, continuing its growth plans in the Polish commercial real estate market. Having previously held investments in Estonia, the company has now set its sights mainly on the Polish market, where assets now make up the majority of its portfolio following this major transaction.

October 2024: Gold drives positive returns in the stock portfolio

Kristo Oidermaa and Romet Enok, Fund Managers

The US S&P 500 index ended October with a return of −1% in dollar terms, while the European Euro Stoxx 50 index posted −3.3% in euro terms. The emerging markets index declined by 4.4% in dollar terms over the month, driven primarily by China, where the index fell by 6% in dollars. The wave of optimism that emerged in China in September has somewhat diminished. Meanwhile, the OMX Baltic Benchmark index rose by 3.5% over the month.

In October, we added the Finnish energy company Fortum to our funds, reduced our gold holdings and sold off the Finnish retail company Kesko from L and Active III. The top performers in the stock portfolio were our gold-related positions, which gained between 4.5% and 7.5%, and our European banking index fund, which increased by 3.5% in October.
On the downside, our investments in energy metals dropped by 7% to 9% and our Chinese position in Alibaba declined by around 12%. We continue to see good opportunities in the commodity sector, given the protection it provides in a challenging geopolitical environment, as well as in Scandinavian companies due to their high quality and strong competitiveness. We have also increased our exposure to US stocks in recent months and intend to increase this exposure in the future.

October was a particularly active month for the EfTEN Real Estate Fund, which acquired a logistics centre and signed a contract to purchase a production and storage facility. The logistics centre in Tallinn has ELP Logistics OÜ as the anchor tenant, with a lease commitment extending for at least ten years. The production and storage facility under development in Harku municipality is being built for ICONFIT, the Baltic region’s leading producer of sports, diet and health foods. ICONFIT has also signed a long-term lease agreement with the fund, with a term of ten years.

The most significant change in the bond portfolio was the liquidation of our position in Volkswagen securities. This instrument, slightly more complex than standard bonds, had been in our fund for nearly a year and a half and provided returns more in line with the long-term average of stock markets. For new investments, we are currently looking outside the global exchanges and our next addition is likely to be a direct investment.

September 2024: The largest indices ended the month positively

Kristo Oidermaa and Romet Enok, Fund Managers

The beginning of September was quite volatile, just as the beginning of August was; nonetheless, the major indices ended the month positively. The US S&P 500 index was up 2% in dollars and the European Euro Stoxx 50 rose 0.9% in euros. The emerging markets index was up as much as 6.4% in dollars during September. This was mainly due to China, whose index gained 23.5% in dollars as the market responded to the country’s long-awaited major government spending aimed at stimulating the economy. The Baltic OMX Baltic Benchmark index saw little change, ending the month down 0.8%.

In September, we sold five investments from the stock portfolio: Siemens Healthineers, Roche Holding, GN Store Nord, Huhtamäki and Valmet. We also halved our position in Agnico Eagle Mines; however, we increased our energy position by buying more in Noble Corp and Valaris.

During the month, our energy metal positions, physical gold and Alibaba delivered the best results, reflecting more positive sentiments in the market due to the announcement that the Chinese government would increase its support to its economy. Investments in the energy sector and gold mining enterprise Barrick Gold Corp. were the biggest drags on the fund’s results in September.

We still see good opportunities in the commodity sector thanks to the protection the sector offers to the investor in a difficult geopolitical environment, as well as in Nordic companies thanks to their guaranteed quality and competitiveness. September was a successful month for the fund’s bond portfolio thanks to our large investment in Eesti Energia securities. In addition to the annual interest rate of 7.875%, the price of the bonds has gone up by approximately 5% since our purchase this July.

We will continue to make bond investments only if their risk and return prospects are comparable to or better than equity investments.