Stockholm (HedgeNordic) – Catella Nordic Long Short Equity, a Nordic-focused alternative absolute return equity fund managed by Martin Nilsson (pictured right) and Ola Mårtensson (pictured left) for the last three years, successfully navigated the choppy markets at the beginning of 2018 and beat the market over the three-year period. The fund returned 29.0 percent in the three-year period ending April 2018, exceeding the 18.7 percent for the Stockholm Stock Exchange as measured by the SIX Return Index (SIXRX). The fund is up 5.9 percent in the first four months of the year, and is down 0.2 percent since the beginning of this month through May 30.
According our statistics, Catella Nordic Long Short Equity generated a total return of 62.9 percent since its inception in December 2010, which corresponds to a compound annual return of 6.8 percent. The annualized standard deviation of monthly returns equals 7.2 percent for the entire period since inception, and 7.4 percent for the past three years. Meanwhile, the annualized standard deviation of monthly returns for the SIX Return Index was 14.6 percent for the past three years. Looking at these three years in particular, the correlation coefficient between the monthly returns for Catella Nordic Long Short Equity and the SIX Return Index stood at approximately 0.4. “We are very pleased with our performance in terms of risk-adjusted returns, and we maintain our goal – to create a good risk-adjusted return regardless of the stock market climate,” Martin Nilsson was cited earlier this month in a press release discussing the past three years.
Catella Nordic Long Short Equity oversees SEK 1.42 billion in assets under management (AuM) as of the end of April, with the fund rapidly approaching the SEK 1.5 billion AuM mark. The growing assets under management are partly attributable to the fund’s results, according to the fund’s portfolio management team, as well as the increasing understanding and interest in the advantages Catella’s absolute return equity fund brings to a long-term investment portfolio. “A modern investment portfolio should have significantly larger elements of alternative funds than today’s norm. The aim is to contribute to a better risk-adjusted return and a calmer journey for the portfolio,” said Nilsson.
The main investment theme for Catella Nordic Long Short Equity thus far in 2018 was betting on companies set to benefit from a continued strong global economy and a weakening Swedish krona. The fund’s long portfolio includes Aker ASA, Qutotec and Storebrand. The main contributors on the short side include short positions in companies such as Orkla, XXL, Citycon, and Swedish banks. The fund’s options hedging, which was gradually increased in the autumn of 2017, was also a large positive performance contributor during the stock market turmoil in February.
Talking about equity valuations in the Nordics, Nilsson says “there are still Nordic companies that are attractively valued and that will produce surprisingly good profits.” However, there is a number of overpriced companies facing structural challenges, which the fund’s team believes will create a significant risk of disappointing earnings. Long/short strategies such as Catella Nordic Long Short Equity tend to thrive in such market environments.