Stockholm (HedgeNordic) –  Founded in 2007 by Tommi Kemppainen and friends, Finnish asset manager Helsinki Capital Partners (HCP) is today a fast growing investment boutique managing approximately 70 million euro and serving almost 1.000 individual clients.

With a novel approach to raising assets, the fund manager targets often overlooked groups of high net worth individuals such as professional athletes and artists. Traditional allocators including foundations and larger financial institutions are also among its clients with special focus on non-profit organizations. HCP has probably also the youngest clientele of private investors that it caters over the internet.

”We have a variety of wealthy individuals among our clients including sports stars, professional poker players and DJs. The goal is to make asset management a non-elitist commodity that is available as a service over the internet. Independent of your knowledge about financial markets or portfolio management, you should be able to get professional advice to reasonable fees and full transparency”, Tommi Kemppainen argues.”

”When we started, our ambition was to charge our clients based on how successful our investment products were. At the time, there were a number of financial products sold in Finland that did not base their fees on the skill of the manager; rather the goal was to squeeze investors into high fee structures. We wanted to create something better”, Kemppainen says.

HCP’s current offering is composed of three funds; two long-only equity strategies called HCP Focus and HCP Quant and a multi-asset fund called HCP Black. The Focus and Quant funds makes out the equity part of the Black fund.

”HCP focus is a very concentrated and highly selective equity strategy, Kemppainen explains. The portfolio has 8-15 holdings that are deeply researched. The fund only invests in companies that shows significant financial strength, identifiable and sustainable competitive advantage and quality of management.”

”The HCP Quant fund employs a quantitative, value based, method to pick stocks and is based on Pasi Havia’s extensive research on small and mid-cap companies. The fund selects the best stocks from tens of thousands of companies, investing in companies that are perceived undervalued based on several different measures”, Kemppainen explains.

These two funds feed into HCP’s flagship fund ”Black” without additional layer of fees. According to Kemppainen, the fact that the funds methodologies both builds on value investing but are executed very differently makes them good complements from a portfolio perspective.

”Ernst Grönblom who runs the Focus fund builds so-called binomial trees trying to evaluate the future impact of company strategies. On the other hand, Pasi Havia who runs Quant, systematically scans earnings reports to build a portfolio of 30 companies. Very different but complementary approaches”, Kemppainen argues.

With regards to the Black fund, this is a multi-asset portfolio that currently holds a 25 percent allocation to equities through Focus and Quant while also investing into uncorrelated performance drivers such as real estate, trend following CTAs, and insurance linked products such as catastrophe ”cat” bonds.

”Black aims to have a highly diversified approach to investing, I look for strategies that can actively contribute to the risk adjusted returns of the portfolio”, Kemppainen says, continuing: ”Currently the equity allocation is low, this has to do with my view that stocks are looking increasingly expensive. As a result, I have allocated equity weights into insurance linked strategies that are not dependent on the economic cycle.”

Kemppainen always seek to get exposure to each asset class in the cheapest way possible, he says that ETFs are often the best instrument to use but not the best choice for all asset classes:

”I typically buy cat-bonds through third parties, there is not an ETF available today that gets me the exposure in an efficient way”.

With regards to real estate, Kemppainen believes that the current quantitative easing measures adopted by central banks could eventually make investors question the true value of money, in this scenario, he regards real estate as an important cornerstone in a multi-asset portfolio.

”Many asset managers use historical data to assess how markets will behave, I employ a thematic approach where I try and find different scenarios that could make market dynamics and asset flows change. Holding a part of the portfolio in real estate makes a lot of sense in many of these scenarios. Someone said that ’real estate is the new global currency’, there is something to that statement, especially when investors are looking beyond gold as a safe haven currency”, Kemppainen says.

Looking forward, Kemppainen says that equity valuations are getting expensive and that he is slowly positioning himself more defensively, adding to insurance linked, real estate and trend following while reducing high yield bond exposure already near zero.

”At some point, interest rates will turn higher. Within high yield bonds I simply view the risks as too high compared to the potential opportunities in the space. Given my view that equities look expensive, my approach is to add to defensive exposures from here”, Kemppainen concludes.

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Jonathan Furelid

Jonathan Furelid is editor and hedge fund analyst at HedgeNordic. Having a background allocating institutional portfolios of systematic strategies at CTA-specialist RPM Risk & Portfolio Management, Mr. Furelid’s focus areas include sytematic macro and CTAs. Jonathan can be reached at: jonathan@hedgenordic.com

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