August was another good month for the GDS Fund with a return of 3.2 percent - an excellent result as the Fund's benchmark index was up 0.4 percent and the Swedish Stock Exchange's return was minus 1.4 percent. Since its inception, the fund has outperformed its benchmark index and beat the Swedish stock exchange by more than 10 percentage points. During the period May to August, which was characterized by some market turbulence, the fund returned close to 7 percent. It should be compared with a return of -5.1 percent for OMX TR and shows the value of diversifying into global equities, especially to global security companies, when there are tougher trading times.
Cyber-security company Carbon Black was again the company in the GDS fund that performed best during the month with a return of almost 40 percent. Since we invested in the company in April, it has returned close to 100 percent. The trend has been driven by the acquisition rumor and escalated in connection with VMware announcing a bid for the company, a deal that will close in 2020.
We expect to see more of this type of business in the cyber security industry. Instead of relying on organic growth, these niche players can achieve greater networks and scalability by being acquired by larger companies. In this case, VMware's network includes 75,000 partners and 500,000 customers, which, combined with access to Dell EMC ecosystems, including RSA and SecureWorks, gives Carbon Black an opportunity to expand its platform in ways that were not previously available. Not unexpectedly, Patrick Morley, Carbon Black's CEO, will lead a security unit created by VMware. We are positive about the offer and divest our holding in Carbon Black.
The portfolio's defense companies performed strongly in August. Booz Allen, Boeing, Northrop Grumman, Leidos, Lockheed Martin and Kongsberg Gruppen increased significantly. Booz Allen, which has created a niche as a consulting services provider, has attractive margins and a large upside to capitalize on the increased federal demand for the next generation of cloud, cybersecurity, analytics, software development and artificial intelligence capabilities. Kongsberg Gruppen delivered top growth with higher profits and achieved a strong order intake for the second quarter, which contributed to the share price rising above 6 percent during the month.
We believe Boeing's cancer trend on the stock market has reached its final stage, especially if you consider the company as more than a manufacturer of 'Max 737'. The company is also largely a defense company with stable revenues and an interesting product portfolio. The GDS Fund has now increased its allocation in Boeing to around 4.5 percent. Following the decision, the company is up just over 10 percent, and 6 percent in August.
The five companies that performed worst in August were Dell, Palo Alto Networks, Fireeye, Saab and Textron. The news that Håkan Buskhe is leaving as CEO of SAAB has in the short term pushed the course, but our assessment is that the company has very good conditions to succeed in getting marketing for its modern products in major parts of the world. The Swedish government's decision to significantly increase the defense funding by 2025 is fully in line with the rest of the world. The increased geopolitical turmoil in the world benefits SAAB and other global security companies.
See the monthly report for the GDS Fund below:
