Market Commentary - June 2024

It's a bit of a waiting game at the moment, as much of the talk is about when we will see interest rate cuts from the Fed. We don't want to see them too late, as the risk of a “hard landing” in the economy increases the longer we are in a high interest rate environment. Data coming in from the US so far this year has been sticky at levels above what is acceptable for a rate cut. In June, however, incoming figures on both inflation and the US labor market have pointed in the right direction. At the same time, the Fed is quite cautious in its statements and wants to see stability in the trend, and says that it will probably only cut once this year. However, the market seems to be taking the Fed's statements with a shrug as the Fed has already swung many times. The Fed's Powell is also clear that it is the data that will decide. Incoming data will thus be more decisive than what the Fed says about it, and right now the market clearly believes in a first cut in September and another cut later this year.

Information for investors

As we move from June into July, this month's letter provides updates on some upcoming changes and shares our perspectives on the market and our funds. At Ace Fonder, we’re committed to evolving our approach to ensure that all fund investors receive the best possible offering. With that in mind, we will be implementing several key changes in the coming months.

A notable update is that the Augmented Reality Fund will be renamed the MetaSpace Fund, effective August 12. Alongside this, the fund will expand its investment focus to include gaming, eSports, space technology, and artificial intelligence (AI). Importantly, no action is required on your part as an investor.

The MetaSpace Fund will retain its core focus on augmented reality, while also allowing for additional investments in high-potential sectors that align with our vision. Our investment strategy remains anchored in specific megatrends that we believe will fundamentally transform society. These trends, which we feel are underappreciated by the broader market, are positioned to generate meaningful returns by tapping into innovation before it becomes mainstream.

While AI has captured widespread attention, we are selective in this space, choosing only those AI companies that support the growth of our core trends: augmented reality, space technology, and gaming/eSports. AI is essential in driving these fields forward, from refining satellite data to enhancing AR holograms and creating personalized gaming experiences.

Another upcoming change is the closure of the eSports Fund and Space Fund on August 30. To continue exposure to gaming, eSports, and space technology, investors can transition to the MetaSpace Fund by purchasing units directly.

These adjustments consolidate our thematic investments into a single fund, optimizing our strategy while preserving our thematic approach. Additionally, we will be reducing the management fee from 1.9% to 1.5% as we streamline operations, aiming to create better opportunities for you as an investor.

If you have questions about these changes, please feel free to contact us at info@acefonder.se.

Holdings

Among the top-performing holdings this month was Adobe, with a +26.5% return. Adobe’s June report exceeded expectations, and the company also raised its forward guidance. Adobe continues to see success in integrating AI tools across its suite of programs, particularly those used for AR and 3D modeling. While the recent rise has made Adobe’s valuation more challenging, we have chosen not to increase our position, which currently represents about 4.1% of the fund.

Conversely, Unity continues to struggle, ending June with a -9.8% return. As mentioned in previous letters, Unity has undergone significant organizational changes, streamlining its product portfolio to concentrate on core offerings. This refocusing is intended to reduce costs and eventually yield positive results. While it remains to be seen if these changes will succeed, we maintain confidence in the company and its products, recognizing that it may take time for the adjustments to have a meaningful impact.