Carnegie Worldwide L/S Inches Upwards in May

Stockholm (HedgeNordic) – Carnegie WorldWide Long/Short Fund reported a modest increase of 0.2% in May, in light of the NHX Composite increase of 0.72% (est.). This follows from its equivalent rise of 0.2% in April and reflects -3.4% YTD. The fund retained EUR 74.6m in AUM at month-end. The fund, which generates competitive risk-adjusted returns, reported a gross exposure (beta adjusted) decrease to 94.8% and a net exposure (beta adjusted) decrease to 12.0%.

Positive contributions to the fund in May were again among its short positions in the retail sector, with the GAP and DSW shorts contributing 33bps and 23bps respectively. Among its long contributions, Dollar General performed well due to a 14% share gain, contributing 27bps. The largest detractor from Carnegie’s May performance were CVS (19bps) and Limited Brands (44bps), the latter of which reported sharply lower same store sales in May, leading Carnegie to exit the position. Carnegie also exited its Bayer holding, with Bayer determining to become more of a chemical than pharmaceutical company via its Monsanto bid.

David Rindegren, Carnegie L/S’s Portfolio Manager, suggested in the fund’s May report that the large Chinese market stimulus (at an investment share of 44%) may be on the verge of receding by virtue of a slowing of credit growth and a strong domestic weighting towards SOE over private sector fixed investment. The fund also disclosed the addition of two new shorts: Edenred, which provides prepaid vouchers for products and services and is being impacted due to the elimination of traditional “middlemen” by digital providers, and United Natural Foods (UNFI), which is expected to return lower margins due to the recent loss of Whole Foods as a customer, alongside other concurrent factors.

The fund remains at a market neutral level with approximately the same net and gross exposure, as few of the parameters Carnegie observes have changed. Elevated valuation levels, level investor sentiment, the FED’s weak hiking cycle and the presence of grey swans prescribe continued caution. The fund looks ahead to beyond June, following the Brexit vote and the FED’s next meeting, where it projects that once these uncertain outcomes are known, the strength of its long holdings and challenges of its short positions will begin to impact valuations and share prices.

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