For SKAGEN's value-oriented funds, the market environment proved challenging and only SKAGEN Focus outperformed its benchmark index. Beneath the performance figures, however, portfolio companies continued to deliver solid operational results.
As enthusiasm for artificial intelligence returned, several funds surrendered part of the relative gains achieved in July. Highly valued technology companies moved higher once again, while more conservatively valued quality businesses lagged behind.
Market sentiment shifted again towards the end of the month as bond yields moved sharply higher across major markets. The yield on the US 10-year Treasury approached 4.8%, while the equivalent Japanese government bond yield neared 3% for the first time since 1996. Inflation data from countries including Spain, France and Poland remained well above the European Central Bank's 2% target, reinforcing concerns that inflationary pressures may prove persistent.
Listed real estate came under particular pressure. As expectations of a "higher-for-longer" interest-rate environment re-emerged, the sector faced the dual challenge of rising yields and renewed geopolitical uncertainty.
SKAGEN Global: Relative performance impacted by renewed AI enthusiasm
August was a challenging month for SKAGEN Global. The fund slightly lagged its benchmark as the AI rally regained momentum following a strong summer. The fund returned 1.3%, compared with a benchmark gain of 1.7% (as measured in EUR). The portfolio managers nevertheless believe that the momentum behind the AI-driven market advance is beginning to fade and that investors will increasingly recognise value outside the market's most highly valued technology companies.
Contributors: Thomson Reuters was the strongest contributor during the month. Earlier this year, the company was affected by concerns surrounding artificial intelligence, but subsequently delivered solid quarterly results and demonstrated its potential to benefit from the wider adoption of AI technologies. TMX Group also contributed positively after completing its acquisition of Cboe Australia, while Canadian Pacific advanced following a reassuring earnings report.
Detractors: Alphabet, Amazon and Aegon were the largest detractors. The two technology giants declined as investors increasingly questioned the scale of ongoing AI-related investment. Aegon reported solid results and announced a larger-than-expected share buyback programme, but the share price nevertheless retreated slightly after a strong rally ahead of the earnings release.
Positioning: The fund remains underweight technology, reflecting the portfolio managers' concerns about the risks associated with the substantial capital expenditure currently being directed towards AI. The strategy remains unchanged: identifying fundamentally undervalued companies. Any significant portfolio changes will be discussed in greater detail at quarter-end.
Outlook: The portfolio managers believe August offered a reminder of what the fund is designed to deliver when enthusiasm for AI begins to moderate. They expect markets to gradually place greater emphasis on underlying business fundamentals and valuation, rewarding companies with resilient earnings and reasonable valuations. The fund therefore remains positioned towards businesses that should benefit if investor attention broadens beyond the most expensive areas of the technology sector.
Read the monthly report for SKAGEN Global
SKAGEN Kon-Tiki: Chinese holdings weighed on performance
Emerging markets recovered in August and outperformed developed markets, supported by strength across commodities, IT and industrials. SKAGEN Kon-Tiki nevertheless underperformed its benchmark, declining 2.0% compared with a benchmark gain of 2.4%. The fund's relative performance reflected its defensive positioning, overweight exposure to China and lower allocation to technology stocks.
Contributors: South Korean lender Hana Financial continued to deliver strong results, supported by healthy margins, stable credit quality and upgraded targets under its "Value-Up" programme. Ivanhoe Mines, which was recently reintroduced to the portfolio, benefitted from robust commodity prices, particularly copper. India's Axis Bank also contributed positively amid strength across the country's financial sector.
Challenges: The fund's larger Chinese holdings represented the main drag on performance. JD.com continued to face pressure on revenues, while Tencent Music disappointed investors with weaker-than-expected membership revenue growth in its core business. Ping An also reported softer growth than markets had anticipated, despite generating strong investment income.
Positioning: The portfolio managers initiated a position in Mexican bank Gentera, which focuses on improving financial inclusion in Mexico and Peru. At the same time, they exited the remaining positions in Brazilian conglomerates Simpar and Raizen following disappointing operational performance and elevated debt levels. Exposure to India was increased through Axis Bank, Life Insurance Corporation of India and UPL, while the fund also added to selected Chinese internet platforms. These additions were partly funded through reductions in Polish holdings and Alibaba.
Outlook: The portfolio managers continue to see attractive opportunities across emerging markets, where valuations remain low relative to developed markets. They maintain an overweight position in both China and India and believe portfolio companies should benefit as the Chinese economy gradually stabilises. While short-term volatility is likely to remain elevated, the long-term investment case remains compelling.
Read the monthly report for SKAGEN Kon-Tiki
SKAGEN Focus: Stock selection drove outperformance
SKAGEN Focus delivered a strong month and was the only equity fund in the range to outperform its benchmark. A number of company-specific catalysts developed favourably during the period, helping the fund rise 3.9% compared with a benchmark gain of 1.7%.
Contributors: South Korean industrial conglomerate KCC, one of the fund's largest holdings, was the strongest contributor. The company announced a comprehensive "Value-Up" plan aimed at increasing shareholder returns through higher dividends, lower debt levels and operational improvements. Brazilian copper producer Ero Copper also performed strongly following solid quarterly results in a supportive copper market environment. Meanwhile, Moroccan mining company Aya Gold & Silver reached the portfolio managers' valuation target and was sold following a highly successful investment since 2024.
Challenges: Aumovio was the largest detractor during the month amid challenging conditions for automotive component suppliers. The investment case nevertheless strengthened following a favourable settlement with BMW and the award of several new contracts. Marcopolo also declined after reporting weaker results, primarily due to an unfavourable product mix and lower export volumes. The portfolio managers believe the shares continue to trade at a substantial discount to normalised earnings.
Positioning: The fund increased its holdings in Hitachi Construction Machinery and Bangkok Bank during the month. Beazer Homes was sold following an improved takeover offer, while Peugeot Invest was exited after the investment thesis developed less favourably than anticipated.
Outlook: The benefits of the fund's concentrated approach were evident during August as several investment cases developed positively. The portfolio managers continue to identify a number of companies trading at significant discounts to their underlying value and believe shareholder-friendly initiatives, corporate activity and operational improvements can continue to support returns regardless of broader market developments.
Read the monthly report for SKAGEN Focus
SKAGEN m²: Rising yields weighed on listed real estate
August was a difficult month for listed real estate globally. As expectations of a prolonged period of elevated interest rates resurfaced, the sector faced renewed pressure from rising bond yields alongside increased geopolitical uncertainty. Despite these headwinds, underlying fundamentals continued to improve. In Sweden, where SKAGEN m² has significant exposure, listed property companies have now delivered growth in cash earnings for eight consecutive quarters. The fund declined 3.5% during the month, marginally underperforming its benchmark, which fell 3.4%.
Contributors: US-based UMH Properties was the strongest contributor after reporting record home sales and higher occupancy levels in a strong quarterly update. Finnish self-storage operator Cityvarasto also performed well, maintaining its full-year guidance despite reporting otherwise modest quarterly results.
Challenges: Brookdale Senior Living, the largest owner and operator of senior housing in the United States, was the largest detractor for the second consecutive month following a disappointing earnings report. Logistics property developer CTP also weighed on performance despite an absence of material company-specific news. The portfolio managers believe the shares trade at an unjustified discount given the company's favourable exposure to nearshoring trends across Europe.
Positioning: The portfolio managers remain particularly constructive on Europe and Scandinavia, where current valuation discounts appear increasingly difficult to reconcile with improving fundamentals. The portfolio is concentrated in structural growth areas including digital infrastructure, social infrastructure, residential property and logistics.
Outlook: Following a prolonged period of interest-rate-driven headwinds, the portfolio managers believe the fundamentals underpinning listed real estate are considerably stronger than current market valuations imply. Eight consecutive quarters of cash earnings growth in Sweden suggest that conditions may have bottomed, and they expect the gap between share prices and underlying asset values to narrow as interest-rate expectations become more stable.
Read the monthly report for SKAGEN m2
SKAGEN Vekst: Korean banks and Bonheur among the strongest contributors
SKAGEN Vekst delivered a modest positive return in August. Relative to its benchmark, the month was weaker, largely due to the fund's lower exposure to the IT sector. The fund gained 0.9%, compared with a benchmark return of 2.0%.
Contributors: South Korean banks Hana Financial and KB Financial were among the largest contributors, supported by a broad recovery in the Korean equity market following a softer July. Bonheur rose by almost 14%, driven by a sharp increase in European energy prices, which improved earnings prospects for the company's power generation activities.
Challenges: JD.com detracted from performance after providing cautious revenue guidance for the second half of the year, despite delivering solid quarterly results. Brazilian fashion retailer Lojas Renner also disappointed investors with weaker growth, while Novo Nordisk fell despite reporting better-than-expected earnings, as sales of oral Wegovy came in marginally below market expectations.
Positioning: The portfolio managers established a position in Swedish security services company Securitas, where they see attractive upside potential if growth improves while downside risk appears limited. The holding in Swedish lender Norion Bank was sold after the shares reached the portfolio managers' valuation target, having appreciated by more than 30% in just three months.
Outlook: With a diversified portfolio of Nordic and international companies, the fund is positioned to benefit from a market environment in which returns become more broadly distributed across sectors and regions. While the lower exposure to technology could represent a headwind should enthusiasm for AI continue to drive markets higher, the portfolio managers believe the fund's value-oriented holdings are well positioned if interest rates remain elevated and investors continue to favour companies with resilient earnings and attractive valuations.