We highlighted in last month’s letter that geopolitical risk tends to increase over the summer. It may not have strictly been geopolitics that caused the sharp stock market decline in early August, but rather a general concern among market participants. Regardless, there was a sharp downward movement, accompanied by an equally sharp upward movement in the ‘fear index’, VIX. We saw no connection to fundamental factors such as economic development or corporate earnings. For the rest of the period, the market gradually regained lost ground.

After a short break during the deepest vacation weeks, the reporting season resumed in August. The trend from the previous month continued, and we can now summarize our impressions of the second-quarter reports. In our internal assessment, 14 companies in TIN New Technology, or 42 percent of the portfolio, reported better than we expected. At the same time, we saw six clearly weak reports, accounting for a total of five percent of the portfolio. Negative surprises were thus tilted towards smaller positions in the fund.

However, not everything in August was about reports. Together with 400,000 gaming enthusiasts (more than ever before), we attended the Gamescom fair in Cologne. The sector has experienced a turbulent period with sharply increased demand during COVID, followed by saturation as life returned to a more normal state. Companies expanded significantly, hired aggressively, and started many game projects, only to later scale back ambitions, cancel projects, and lay off tens of thousands of game developers globally. Even though we now appear to be at the end of this adjustment period, some companies will still have to deal with the effects of an overly expansive period for a while longer.

It often takes between three to five years to take a game project from start to market launch. Companies might have had great ambitions and expectations when they began a project in 2020 or 2021. Now, and for some time to come, they must decide whether to continue with these projects or not. If they have invested 80 units of capital so far and need 20 more to complete the project, what revenue expectations must they have to continue? 40? 60? Regardless, it is most likely that we will see a gradual improvement in return on investment (ROI) in the industry as old projects are gradually completed.

Different companies are in different stages of this process. Frontier Developments, which in our view was late to act in the new, tougher market environment, now has a cleaner portfolio than most. The theme, which is the same for Paradox Interactive, is to return to the core and focus on what they know they are truly good at. Embracer showcased what might be their most important title of the year, Kingdom Come Deliverance 2. Looking at their upcoming lineup, it is clear that KCD 2 has the greatest commercial potential. This is based on both its reception at Gamescom and the fact that KCD 1 has had good sales and engagement on both Steam and Xbox in the lead-up to the launch of its sequel.

TIN New Technology A

In the past month, the fund’s unit value decreased by 1.5 percent. During the same period, the broader benchmark index for Nordic small-cap companies, VINXSCN, also declined by 1.5 percent. Since the fund’s inception on February 4, 2019, it has risen by 53.2 percent, while the index has increased by 88.9 percent. At the end of the month, the fund’s three largest holdings were Novo Nordisk, Evolution, and Surgical Science. For a full list of the top ten holdings, visit tinfonder.se/en-us/funds/tin-new-technology.

The holdings that contributed the most to returns during the month were Qt Group, Revenio, and Nemetschek. Among the holdings that negatively impacted performance were Embracer, Fortnox, and Paradox Interactive. The fund’s largest segment is Software, which accounts for 41 percent of assets under management, followed by Healthcare at 37 percent, and Digital Brands at 10 percent.

TIN World Tech

In the past month, the fund’s unit value decreased by 0.3 percent. During the same period, the broader benchmark index MSCI World dropped by 0.7 percent. Since the fund’s inception on June 12, 2020, it has increased by 38.8 percent, while the index has grown by 97.9 percent. At the end of the month, the fund’s three largest holdings were Microsoft, Novo Nordisk, and Alphabet. For a full list of the top ten holdings, visit tinfonder.se/en-us/funds/tin-world-tech.

The holdings that contributed the most to returns during the month were Straumann, Veeva Systems, and Adyen. Among the holdings that negatively impacted performance were Charles River Laboratories, Alphabet, and Nintendo. The fund’s largest segment is Software, representing 57 percent of assets under management, followed by Healthcare at 21 percent, and Digital Brands at 8 percent.