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While December 31 may be a random point of lap-time measurement in investment marathons, it does mark the end of the year as we know it – and the end of most fiscal years.

This time, I'm delighted to report that December marked the end of a most satisfactory year, with an aggregate return of some 4.6 billion kroner to our investors and unitholders.

Surprised? You would be, wouldn't you, after the despondence and dejection that reigned a year ago. But that's just the nature of the market. After all, most market movements are simply noisy deviations from a strong long-term trend. And there was certainly a bit of catching up to do after the sorry end to 2018.

Furthermore, I would venture that last year's market fears were exaggerated. At the outset of 2019, there was a significant margin of safety in the stock market: The difference between the S&P 500 earnings yield and the 10-year government bond yield was almost 3.6 percentage points. Of course, this provides no guarantee that stock prices will go up, but it does help buttress the market.

Stock market pricing did increase in 2019, meaning that earnings yields fell in all major markets. But so did interest rates. At 3.2 percentage points, the margin of safety is modestly lower.

Does this entail a prediction that the market will keep going up, despite (yes, despite) increased levels of optimism?

Alas, no. I've learned long ago to abstain from fortunetelling. Whereas long-term returns are more predictable, and indisputably positive, what happens tomorrow is anybody's guess.

The challenge of predicting stock market vagaries is succinctly put in a wonderful quote by behavioral economist Meir Statman, reproduced in the similarly wonderful "The Devil's Financial Dictionary" by Jason Zweig:

The market may be crazy, but that doesn’t make you a psychiatrist.

Meir Statman

Fund updates for December 2019

Pareto Investment Fund
The fund rose significantly in the last two months of the year, finishing ahead of its benchmark index after a year of major fluctuations. The Norwegian market rose over 19 per cent in 2020.

 

Pareto Aksje Norge
2019 was a good year for stocks, with a return that was just above the historical average portfolio return.

 

Pareto Nordic Equity
The fund rose significantly during the last two months of the year, reducing the distance to its benchmark, but finished behind. Thus, we are not satisfied with the previous year despite a good absolute return.

 

Pareto Global 
2019 was a very good year for Pareto Global, with a return of 30 per cent. This reflects strong earnings growth in our portfolio companies.

 

Pareto Nordic Return 
The fund rose significantly during the last two months of the year and delivered good absolute returns. It has been a disadvantage to be overweight in Norway, but we have benefitted from holding a high share of the fund in equities.

 

Pareto Nordic Alpha
The fund continued its positive trend in December, even though the Swedish krone and the euro weakened significantly against the Norwegian krone.

 

Pareto Nordic Omega
The fund continued its positive trend in December, even though the Swedish krone and the euro weakened significantly against the Norwegian krone.

 

Pareto Nordic Corporate Bond
December ended a very strong year for Pareto Nordic Corporate Bond, with positive returns each month across all share classes.

 

Pareto Nordic Cross Credit
Late November we launched our new fund Pareto Nordic Cross Credit. The fund provides access to an attractive mix of Nordic investment-grade and high-yield bonds, with low sensitivity to interest rate fluctuations.

 

Pareto Global Corporate Bond
Despite strong headwinds on several fronts, we can summarize a year with solid returns for the fund. We work systematically and consistently with ESG within the framework of the Nordic Swan Ecolabel, where we are one of the few corporate bond funds with the Nordic Swan Ecolabel license.

 

Pareto Høyrente
2019 was a very good year for Pareto Høyrente. December was no exception to a 12-month long series of positive returns, characterised by low volatility.

 

 

Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.

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