Equities, credit and bonds all contributed to making 2023 a good year for investment, with high returns for you as a member. All of the long-term members’ investment funds generated positive returns in 2023, and in the main fund, LD Discretionary, long-term members were credited with a return of 10.1%.

LD Discretionary

Around 90% of members’ assets are invested in the flagship product, LD Discretionary, which is an actively managed portfolio comprising both shares and bonds. In 2023, LD Discretionary generated a attributed return of 10.1%. This positive return was driven in particular by global equities, but all asset classes contributed positively to the year’s result. Foreign equities, senior loans and high-yield bonds delivered double-digit percentage returns. For the highest-rated bonds, the return for the year totalled just over 6%.

LD Discretionary continues to meet expectations of stable and strong long-term returns.

The portfolios

In 2023, all investment funds delivered positive returns. LD Global Equities leads the way with a return of 17.1 per cent. IT and technology shares, in particular, have driven global equity markets. This positive trend follows a year of significant losses. Over a five-year period, the equity funds have delivered very high returns despite the significant losses in 2022.

With a return of 8.5%, the LD Environment & Climate portfolio underperformed the LD Global Equities portfolio in 2023. This is partly due to headwinds facing companies producing renewable energy, and the fact that the portfolio has no exposure to the global technology companies that rose sharply in value.

Towards the end of 2023, falling interest rates led to significant price gains in the bond markets, resulting in healthy returns in the bond portfolios. LD Short-Term Bonds ended the year with a return of 5.0%, whilst LD Mixed Bonds recorded a return of 5.3%. Very sharp rises in interest rates in 2021 and 2022 led to losses which the bond portfolios have not yet fully recouped, despite solid returns in 2023.

Concerns about persistently high inflation and a severe economic downturn gave way to growing optimism as the year progressed. Inflation returned almost to normal levels, the labour market remained exceptionally strong in the US, and there was solid growth in the global economy. Geopolitical tensions characterised 2023, with the war in Ukraine continuing and the conflict between Israelis and Palestinians reigniting fiercely, but these tensions had no significant impact on the financial markets.

Interest rate trends were one of the biggest challenges facing the financial markets in 2023. In the third quarter, interest rate rises caused stock markets to fall quite sharply amid fears that private consumption and corporate earnings would be adversely affected. In the fourth quarter, these fears were replaced by positive expectations that interest rates would not rise any further – perhaps even the opposite – and that consumers and businesses would be able to cope with the current level of interest rates. We therefore saw a very positive trend in the equity markets towards the end of 2023. The trend in interest rates also benefited the bond markets, which have likewise delivered healthy returns.

Morningstar analyses performance using a rating scale of between 1 and 5 stars. The rating covers investments in listed shares and bonds, which account for approximately 99% of LD Discretionary. As at 31 December 2023, LD Discretionary’s listed investments were awarded a full 5 stars. It is an impressive achievement to secure a top ranking in a comparison of nearly 1,000 European investment funds. This confirms that its returns have been among the top 10 per cent of investment funds with moderate risk in Europe. The rating varies from month to month, and here at the start of 2024, LD Discretionary continues to hold a 5-star rating. LD Discretionary’s listed investments have consistently ranked in the top third for the past 10 years.

Bond portfolio at the very top

The LD Short-Term Bonds portfolio performed well over the year, delivering a return of 5.0%. Morningstar has awarded the portfolio a top rating of 5 stars as at 31 December 2023.

In recent years, bond funds have failed to live up to the general expectation that they would protect savings. However, even over a 10-year period, LD Short-Term Bonds retains its 5-star rating.

Losses in share portfolios were recouped in 2023

The high returns in 2023 follow a year – 2022 – of negative returns. Fortunately, the negative returns have been more than offset by the positive returns achieved in 2023. LD Danish Equities and LD Environment & Climate were both in the top third of Morningstar’s analysis (4 stars as at 31 December 2023). LD Global Equities was in the middle group.