Stockholm (HedgeNordic) – Nordic equity hedge funds are on track to post a third consecutive losing month in July. The NHX Equities lost an estimated 0.44% in July (93% reported), bringing the year-to-date development of the index to 1.70%. Should Nordic equity-focused funds continue in a similar fashion through the end of the year, this group of the Nordic hedge fund universe will likely suffer the worst annual performance since 2011.
Despite witnessing a strong second-quarter earnings season, broader equity markets drifted lower during the month of July. With around 60% of companies having reported second-quarter earnings through the end of July, the growth in the bottom-line results of U.S. and European companies appeared quite solid, enjoying an earnings-per-share growth of 7%. The percentage of companies beating analyst expectations was larger in the U.S. compared to Europe, with 77% of U.S. companies beating estimates versus a proportion of 57% for European companies. The depreciation of the U.S. dollar is believed to explain the difference, a depreciation likely caused by increasing doubts about Donald Trump’s reflationary agenda.
Nordic hedge funds, as measured by the NHX Composite, gained an estimated 0.21% in July (91% reported), mainly driven by the strong performance of CTA funds. The NHX CTA index gained 2.37% in July, after suffering four consecutive months of negative performance. Despite experiencing minor setbacks in each of the past three months, the equity-focused group of Nordic hedge funds continues to be the second-best performing sub-category within the NHX universe, trailing the multi-strategy group of funds.
Although the universe of equity-focused hedge funds as a whole witnessed a lackluster month in July, there were a couple of investment vehicles that stood out of the crowd and delivered strong gains. Two investment vehicles from the Helsinki Capital Partners family of funds, as well as one of the funds managed by Borea Asset Management, were the biggest contributors to the performance of NHX Equities in July. The HCP Focus fund, which follows the discipline of value investing, gained 4.62% last month, bringing the fund’s year-to-date return to 12.19%. As a result, the Finish value-oriented fund is among the top three best-performing Nordic equity-focused hedge funds thus far in 2017, trailing only Rhenman Healthcare Equity L/S and activist fund Accendo Capital. The HCP Quant fund, which uses quantitative methods to pick small- and mid-sized companies at a discount, returned 2.75% in July, while Norwegian fundamental value-oriented fund Borea Global Equities posted a gain of 2.03% in July, extending the year-to-date gains to 10.93%.
Two funds from the Atlant Fonder AB family of funds were the worst-performing Nordic equity funds in July, with Atlant Edge posting a negative return of 6.17% and Atlant Sharp returning a negative 5.95%. Despite suffering weighty losses in July, as well as losses above 2% in the previous month, the year-to-date performance of the two funds remains in positive territory for 2017. Atlant Edge is up 3.31% year-to-date, while Atlant Sharp returned a slightly lower 1.52% in the first seven months of the year. Long/short equity fund Gladiator Fund, one of the best-performing equity funds in June, suffered a 4.40% decline in the subsequent month. Inside Hedge has not enjoyed a great summer in terms of performance either, as the fund recorded two consecutive months of negative returns in excess of 2%.
Inside Hedge delivered a negative return of 2.75% in July. The fund’s net exposure to the energy sector contributed massively to performance, as the fund’s oil-related investments gained nearly 20%. Inside Hedge made a new investment in Nordic software company Vitec Software Group AB at the beginning of the month, which turned out to be the month’s most profitable holding. Meanwhile, two of the fund’s three largest holdings, namely IT company Addnote and forensics company Micro Systemation, fell by a disturbing 10% and 12%, respectively. These investments had the largest negative impact on the fund’s July performance.