Against a backdrop of rising geopolitical tensions, fiscal pressures and concerns over AI spending, it has gone largely unnoticed that global equities broke new records during the summer. The MSCI All Country World Index hit an all-time high in mid-August and entered September up 14% in EUR year-to-date, closely followed by the MSCI Nordic benchmark which is 9% higher this year and hit its own record high at the end of summer[1].
SKAGEN Vekst – our combined Nordic and global equity fund – has performed even better. It has returned 16% in EUR terms over the first eight months of 2026, 2 percentage points ahead of the index. More importantly for a fund celebrating its 33rd anniversary in December, Vekst is also beating its benchmark over one-, three-, five- and ten-year periods as well as since inception, with annualised absolute returns of 13% in EUR since 1993[2].
The outperformance is largely due to continued strong stock selection. Samsung Electronics is this year’s standout contributor with the AI rally boosting the Korean giant’s share price by over 110%. Compatriots Hana Financial Group and KB Financial Group have also contributed strong portfolio returns as the pair increasingly prioritise profitability and shareholder returns over balance sheet growth. Despite delivering share price gains above 40% this year, both remain attractively valued and are increasing share buybacks which should help drive further value creation.
Price discipline
Another factor driving portfolio returns is price discipline. Samsung has been reduced from a 4% portfolio position at the start of 2026 to less than 1% and Nokia, the fund’s third best contributor this year, was another IT holding sold into strength and has since been exited entirely. In contrast to many value managers who avoided AI stocks on valuation grounds, Vekst found attractively priced exposure in names like Broadcom, Applied Materials, Alphabet, Alibaba and SK Square (SK Hynix). Following strong equity performance (particularly Broadcom and Applied Materials whose shares rose 10x since entering the fund) IT stocks now represent only 2% of the fund, down from 7% at the turn of the year.
The proceeds have been redeployed into areas of the market with more favourable risk-reward dynamics. We have increased exposure to European industrials and materials, for example, with Swedish bearings manufacturer, SKF, polymer compounder Hexpol and Austrian building materials producer Wienerberger together accounting for around 5% of the fund. Each holding offers exposure to a depressed European construction and industrial cycle with valuations at typically attractive lows.
Another area is consumer stocks which have de-rated heavily over recent years and where we have added exposure through staples companies like Diageo and Nomad Foods, alongside discretionary stocks such as Puma and Hugo Boss. In emerging markets, we have added Brazilian fashion retailer Lojas Renner which continues to expand its store footprint, and Chinese e-commerce conglomerate JD.com, now a top five position in the fund. We believe the market’s view of its underlying earnings power is clouded by losses in its newer business initiatives that we expect to decline.
Finally, we have also increased portfolio exposure to companies that investors’ have seemingly written off as losers from AI, including London Stock Exchange Group, Euronext, business process outsourcer TaskUS and Danish hearing technology group GN Store Nord. We are sceptical that the second-order effects of such a technology are as significant as many believe and therefore believe that the long-term investment cases of these businesses remain attractive.
Diversified, discounted portfolio
The result of these changes is a portfolio that offers investors diversification but very different exposure to the benchmark. In geographic terms, Nordic countries represent around half of assets, spread mainly across Denmark (18%), Sweden (13%) and Norway (10%). Elsewhere, Korea (10%) is the largest country exposure, followed by the US (8%) and China (7%). Meanwhile, Financials (22%), Industrials (16%), Consumer Staples (15%) and Materials (9%) are the largest sectors.
Vekst’s overweight positioning in emerging markets and value-centric sectors, and underweight exposure to the US and IT, translates into a heavily discounted portfolio. The fund trades at P/E and P/B discounts to the index of around 30% and 60%, respectively, with weighted upside of over 40% to current price targets[3]. The portfolio also offers lower relative risk in terms of standard deviation (12% versus 14% for the index) and maximum drawdown (-17% versus -21% for the index)[4].
This downside protection could be especially important with global equity valuations currently above long-term averages while geopolitical and economic storm clouds gather on the horizon. We continue to view the US equity market, in particular, as overvalued, both relative to other geographies and its own historical average. We also believe that investors are underestimating the risk of persistently higher inflation and interest rates – again, particularly in the US where large fiscal deficits, tighter immigration policies and higher tariffs on imported goods make a meaningful and sustained decline less likely.
In contrast, we remain positive on select emerging markets, notably Korea where depressed valuations combined with improving corporate governance should continue to drive shareholder returns. We are also positive on Europe, especially companies in the financial, industrial and energy sectors, including the Nordic countries which form the bedrock of our portfolio.
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All information as at 31/08/2026 unless stated.
[1] Source: MSCI as at 31/08/2026 in EUR.
[2] Returns net of fees in EUR as at 31/08/2026.
[3] Source: Bloomberg, as at 31/05/2026.
[4] Past five years as at 31/05/2026.