Short US Dollar Despite 3-Year Low

Stockholm (HedgeNordic) – Brummer & Partners-backed Nektar is shorting the U.S. dollar in anticipation of “strong momentum in the short run,” says Nektar’s Chief Investment Officer, Patrik Olsson to Bloomberg. The greenback hit a three-year low last week after the U.S. Treasury Secretary, Steven Mnuchin, suggested a weak dollar was good for U.S. trade.

The lack of volatility in financial markets has hurt macro hedge funds such as Nektar in recent years, but the Sweden-based fund manager expects improved performance as market volatility picks up. “Volatility has already increased this year from record-low levels,” says Olsson. “It will continue higher.”

Nektar, a market-neutral hedge fund that manages SEK 25.5 billion in assets as of the end of December, was down 2.6% in 2017, recording only its second annual loss since the fund’s inception in early 1998. The fund has generated a compound average annual return of 9.8% since inception.

“The market hasn’t been free to set the right price on a lot of asset classes when this is changing the prices will be more volatile,” Olsson told Bloomberg. “Several central banks are cutting QE, and the U.S. central bank is shrinking its balance sheet. Central banks are also normalising rates which will result in higher term premiums and implied volatilities in markets over time.”

Olsson also said that “this year will bring more volatility between different markets.” “We try to exploit that. With rising volatility, a lot of strategies will benefit — rates, currencies and macro trading,” he added.

To read the full Bloomberg article, click here.