novo-2016-portfolio-48.html
Novo Annual Review 2016
49 / 71
2016 ? a strong year for
financial
investments
d uring 2016, the value of the novo a/s?
financial
investment
portfolio
yielded dkk 2.6 billion. by the end of the year, the total value of the
financial
investments
portfolio
reached dkk 38.8 billion. 1 during the year, us interest rates increased while danish interest rates decreased. our fixed income assets were not significantly affected by the changes as we continue to have a very low interest rate risk in our credit and bond
portfolio
. however, the increase in the us interest rates led to higher earnings expectations for some of the large us banks and insurance companies in which we are shareholders. credit spreads narrowed across the entire asset class in 2016. particularly low-rated and energy-related credits experienced significant returns. our credit
portfolio
has little energy exposure and is generally less risky than the average high yield market. consequently, our credits did not benefit from the appreciation of those assets. equity market returns were broadly flat until the us election. following the election, equities appreciated significantly, in particular within the energy, materials and
financial
sector. we have an overweight position in the
financial
sector, which contributed positively to our relative performance, but an underweight position in energy and materials, which contributed negatively. the total liquid
financial
investments
portfolio
delivered a return of 8.1% and a total profit of dkk 2.6 billion. the weighted benchmark of the
portfolio
returned 9.3%. as such, this was the first year of underperformance since the initiation of the
financial
investment activities in 2005. we look back on a year where
financial
assets remained expensive; interest rates were at a historically low level; credit spreads stayed below historical average levels, and market values of equities remained high relative to their fundamental earnings power. as a result, we expect
portfolio
returns over the next three to five years to be somewhat lower than they have been over the past seven years. 1 including illiquid
financial
investments
and the novo nordisk foundation?s share of the liquid
financial
investment. continues on p. 50 49
financial
investments
investment-portfolio-managers-50.html
