Stockholm (HedgeNordic) – Since introducing a new team of portfolio managers in May of this year and having remodelled what was previously a fund based on IPM:s Systematic Macro Fund, Aktie-Ansvar Kvanthedge is off to a good start under its new design.

The fund has gained 3 percent since the start under the new regime on May 25 and has outperformed the IPM Systematic Macro Fund by 6,2 percent, according to portfolio manager Björn Löfdahl.

Löfdahl explains that the management differs in several important aspects compared to the previous fund.

“Apart from having a new investment team onboard, we have a broader set of assets and strategies, a new portfolio allocation methodology as well as a new approach to setting risk limits.”

When previously, the fund traded tactical asset allocation strategies on equities and fixed income while employing value models to trade equities, fixed income and currencies, the managers have today adopted an approach that also trades carry and commodities from a value standpoint.

“We have added carry strategies, primarily playing the shapes of curves in the futures markets as well as commodity strategies trading energies, metals and soft commodities from a value perspective using fundamental data inputs”, Löfdahl says.

“Our approach can be compared to what is commonly known as risk parity, where we want clusters of correlated assets to be allocated the same amount of risk. The fund has a target volatility of 10-15 percent annually, but we prefer to look at tail risks in order not to underestimate the impact of stressed market scenarios.”

“The downside with a risk parity approach is sudden correlation breakdowns which is why looking at tail risks makes more sense than trying to model risk by looking at underlying volatility measures. Should we solely use volatility as a way of assessing risk, we would typically be at the highest risk exposure when things turn ugly, I do not feel comfortable with that.”

The remodelled Kvanthedge fund has shown decreasing correlations to the original IPM fund since inception, the reason primarily being the broadened portfolio regarding strategies and markets, according to Löfdahl.

“I think our new set of models and the fact that we now trade commodities has had the greatest impact”, says the portfolio manager.

In creating the new models, Löfdahl and his colleague Tobias Grelsson has relied heavily on the experience and knowledge of the team’s third member Boualem Djehiche, a professor of mathematical statistics from KTH.

“Boualem has been a vital asset in coming up with the rationales behind the models that we put into place,” Löfdahl says.

The current environment of low market volatility has worked well for the strategy, but Löfdahl does not foresee a major problem in markets turning increasingly volatile as long as there is some divergence creating relative value opportunities. Even if such opportunities fail to materialise, the fund can generate returns anyway thanks to its market-neutral carry strategies.

Print Friendly, PDF & Email
The following two tabs change content below.

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

Latest posts by Jonathan Furelid (see all)

Leave a Reply

Your email address will not be published.

Time limit is exhausted. Please reload CAPTCHA.