Optimise your fund portfolio

Hello!

A warm welcome to DNB's studio in Stockholm.

Today we have a lovely visitor from Oslo.

Ole Jakob Vold from Oslo.

Who is a manager of the DNB Low Volatility fund.

We will talk a bit about what kind of fund it is.

Ole Jakob Wold will tell us a bit about how it works.

A warm welcome here to Stockholm.

Thank you for that

You have an exciting fund.

I don't know it terribly well, but I know it's incredibly exciting.

Or perhaps not so exciting, perhaps it's boring, I don't know.

No, I think it's exciting.

It's a product that isn't so common.

It's a very active fund that's a bit different from ordinary active funds.

But when I go around and tend to call it the index killer, there's a big commotion in Norway at least.

Index killer?

Yes.

OK, exciting.

A bit about that – I had a major trend into index and global index funds today.

And the reason for that is that it has a low price.

Whereas I believe that the price you pay in equity is the risk.

And the risk in an index fund is far too high.

So that is the fund here.

Just about providing low risk.

And that becomes 20–30–40% lower risk than an index fund.

And then you can own much more.

But this is a global fund.

Global fund.

But does that mean you remove certain companies that are high risk?

And why?

Where does this go?

Yes, many people think it must be an odd portfolio, companies you don't recognise.

But if you had seen the 50 largest companies in the portfolio, you would have recognised 45, you would have known who they were.

They are completely ordinary companies, but they correlate poorly.

They diversify very well.

All the companies are in MSCI World.

All liquid, large companies.

But the entire design of the fund is to exploit counter-variations.

It makes a big difference.

A risk reduction of 20–40 per cent.

Then you can have 30% more equities without getting higher risk.

That sounds absolutely brilliant.

Exciting.

I'm thinking that when the stock market performs very strongly in certain sectors, as you have done over a period, quite a long period, with technology and these somewhat large ones, how has your fund kept up with that development?

The fund is well invested in tech as well, but when the stock market reaches new all-time highs, the low-volatility fund loses out.

But then it falls by half in the downturn.

And if you take a...

Over a long period, a 25-year period, the return is identical on the world index and a low volatility index.

This is a way to invest for those who are a bit long-term and think a bit smart.

Because as you say, it's these moments, when it goes down and drops, that's what hurts.

It's not calm.

So this fund is especially for people who want to diversify their portfolio.

Let's say you have a very active high-risk portfolio.

Then many people use a global index fund to diversify risk.

It will be much more efficient in a low-volatility fund.

Typically a fund to invest in when the stock market is at an all-time high.

So this is a bit like an insurance fund?

You don't take equally high risks.

And it's called low vol.

There is lower volatility and smaller fluctuations overall.

How do you make this selection?

There must be quite a substantial amount of work behind this.

I am a systematic manager.

The risk portion of the portfolio is the important part here.

And that is just one risk model.

All systematic managers use a risk model.

And here we have all the weight on the risk model.

No weight on selecting the right companies.

And then it sounds to almost everyone with a finance background, I think, like a lower risk, lower rate of return.

But that is not how it works in the equity market.

Check it yourself, I mean 25 years, 30 years.

It is exactly the same rate of return in a low-risk product as in an index product.

But low-risk.

But Ole, you have been working on this for a while, I believe, have you not?

I started with this on 12 December 1994.

1994?

Yes, 1994.

That was quite a while ago.

And back then we created traditional active products, and we noticed that the products with the lowest risk had the same rate of return as the index.

That doesn't match what my finance professor said.

So that's when the idea of low-volatility funds started.

My largest low-volatility fund was launched in 2009.

Since then I have had the low-volatility portfolio.

Incredibly exciting.

Who is this suitable for?

Is it for those who want to reduce their overall risk in their portfolio?

Yes, it is often used to balance risk.

You do not want to sell your active high-risk product.

Then you can balance the risk by purchasing a low-risk product.

Or in my family, we have five children.

All their money is in low-interest accounts.

And there it stays.

It does not follow the market.

I know I get roughly the same return as an index fund or an actively managed fund.

But it carries much lower risk.

So you could say this can be a good complement for many who perhaps consciously or unconsciously have very large exposures to somewhat higher risk than they might actually want in their portfolio.

So this is very good and becomes a bit more boring, but perhaps achieves a slightly better rate of return.

We must thank Ole.

Thank you for coming here.

I know you have more meetings to attend.

And if you think this would be interesting to invest in, read more about DNB.

The funds at dnbam.se.

Speak with my financial adviser.

Many thanks for being willing to contribute.

And thank you Ole for coming here.

Thank you for that.

Hello and a warm welcome to us at DNB and this market update for September and what investors have been doing.

My name is Trym Smedsrud and with me in the studio I have our investment economist Camilla Wik.

Welcome.

Thank you Trym.

It has been a hectic month.

Absolutely packed with news on the news front in September.

It has, and September is traditionally known for being a bit grumpy, quite volatile.

If we look back at what summarises September, what would you highlight?

Yes, September turned out to be a mixed month.

Looking at the world index, it fell 1.2 per cent measured in dollars.

But then the krone also turned weaker, which is positive for returns measured in Norwegian kroner.

So there it was up around 1.4 per cent.

At the sector level, the technology sector was clearly the best-performing sector this month.

Whilst materials was the...

The best sector last month was this month's weakest sector, so this picture shifts somewhat from month to month.

September has also been characterised by the interest rate market.

A great deal of interest rate uncertainty.

The US 10-year Treasuries have been the focus of much attention.

It rose 50 basis points during the month and ended at around 5.3%.

And if we look at the MOVE index, which measures expectations for fluctuations in the interest rate market going forward, it is back at the levels we saw during the turbulence in March.

But this turbulence is not reflected in the equity market, at least not so far.

If we look at the VIX index or the fear index, it has remained fairly stable, and not shown the same swings as we have seen in the interest rate market.

Absolutely, so in brief we can say that the risk appetite among investors is still apparently present, and the market, as you say, has come through September quite well.

If we take a look at our investor base and the equity side, what is the summary there?

What have our customers traded most, particularly on the buy side?

Yes, they are quite broad.

That is the picture on the buy side.

Which share has seen the most net buying?

There has been a period of somewhat weaker price performance.

DNB Carnegie has a buy recommendation on the share and points to potential for increased pricing and further cost cuts, among other things.

They also believe that the company's strong market position limits the risk of AI disruption.

It will be exciting to follow developments going forward.

Telenor has also...

Number 2 on the list of most purchased shares has also experienced a period of weaker price performance over recent months, but in September the share came under further pressure following news related to the Myanmar case.

However, investors have used this price decline to buy into the share and look beyond the more short-term uncertainty that has prevailed.

The more long-term drivers in the company.

Absolutely, and this AI disruption is something that is constantly on investors' lips, so how it will affect the way we as consumers will shop, no one really knows yet, but there is certainly a lot of exciting potential there, absolutely.

If we move over to the selling side, Camilla, which shares have our investors been selling?

Yes, it is still very much energy-related.

Three out of five shares are linked to energy.

Also Frontline, which has strong returns year to date, almost 130 per cent, following a period with sky-high freight rates.

And investors are then taking profits and selling out to potentially exit before there is a more permanent solution in Hormuz.

And the charter price is expected to fall back somewhat.

And the same applies to freight rates.

Frontline was also this month's most traded share, meaning it had the highest number of transactions.

Nordic Semiconductor has also seen strong price performance following both a second quarter that beat expectations and better guidance than anticipated.

DNB Carnegie also highlights the Garmin mention as an important milestone.

We have seen that customers have been buying the share on the way up in recent months, but we now see that they are turning around and selling.

This suggests that more people are also using this price development to take profits.

That is quite interesting, such as Nordic XM Conductor, it was not long ago that it was on the most-bought list, and now we see that it was on the most-sold list, so obviously after a strong period investors are perhaps securing some profits.

If we move over to the fund side, what have investors been doing there?

Activity on the fund side remains high.

They have made net purchases of funds totalling around NOK 700 million.

But it is the broad-based funds that continue to top the list.

This is a trend we have seen over time.

DNB Global Index and DNB Norge Index are at the top of the list.

But we also see that the more composite solutions are now increasing in interest.

So these are solutions that provide a ready-made diversified portfolio.

And in addition, just 80 which is on number...

Four here also provides an interest component in the portfolio.

On the selling side, it is the more specialised funds that investors are selling out of, and DNB Technology is the most net-sold fund in September.

We have seen that over a period of time now, but also Nuclear Energy and Disruptive Opportunities.

Even though the funds delivered a good rate of return through September, up around 7%.

Another trend that also continues from August is this difference in interest for Norwegian exposure.

We see that they are buying into DNB Norway Index, but selling out of the actively managed Norway fund.

So they want, the index managers, or index investors want Norwegian exposure, whilst the investors who once chose active management are now selling down.

And that also coincides somewhat with the picture we see in equity trading.

So that is an observation we are looking at.

On trading patterns now.

Absolutely.

And as I mentioned, we got through September quite well.

As we stand here today, we have entered October.

What are our thoughts on the market going forward, Camilla?

We remain positive towards the equity market and also technology as a sector.

We are closely monitoring both where...

how long this pace of AI investments can continue and measuring it against earnings growth.

Now we have third-quarter reporting in the coming weeks, and very few companies have issued any profit warnings, so that is a very good starting point.

So it will be exciting to follow along going forward.

Especially within the technology sphere.

Absolutely, and with the pace we are seeing these days, things are going to move quite quickly going forward, I expect.

With that, we draw a line for today and thank you for joining us, and see you again.