LHV World Equities Fund

In December, European and US central banks continued to raise interest rates and equity markets remained under selling pressure. Fund’s unit value fell by 2.3% in December. We reduced equity positions in the fund in order to create liquidity for adding new positions. The past year was negative for equity markets. Most major equity indices fell by 10-20%. More expensive growth stocks fell several times more. Fund’s unit value fell by 13.6% over the year. The negative contribution came largely from Nordic equities. The biggest decliners were GN Store Nord and TCM Group. Largest gainers were Valaris and Rockwool. Profits of companies in the fund resisted to changes in the market environment well in 2022. The economic environment itself did not show much weakness yet, but higher interest rates clouded the outlook for 2023. We expect that the environment in the equity markets will remain difficult in 2023. In Europe and the US, central banks continue to raise interest rates as inflation remains above the desired 2% everywhere. High inflation leaves a mark on consumption and spending that is not essential will be cut. On the positive side, China has made a change of direction in its strict corona policy. The easing of movement restrictions will restore economic activity in China and this will be positive for companies related to natural resources, where the fund has invested. In difficult times, crisis-proof companies are those whose products and services are not easy for consumers to cut. We have tried to find such companies for the fund, whose need for consumption is underestimated by investors in difficult times. We also consider that these assets are reasonably priced. The funds largest investments are in stocks of mineral resources and materials industry companies. The funds five largest individual investments are Freeport McMoran, Barrick Gold, UPM, Rockwool and Metso Outotec.