Stockholm (HedgeNordic) – Formue Nord Markedsneutral, a Danish market-neutral fund focusing on special situations, has announced it will be closing its doors to new investors at the end of April following strong performance and accelerated investor capital inflows. The special situations-focused fund has grown to manage DKK 195 million (roughly €26 million) at the end of March from DKK 11.6 million at its inception in December 2015.
Formue Nord Markedsneutral, managed by a three-member team comprised of CIO Rasmus Viggers (pictured right), CEO Thøger Dam Johansen (pictured left) and analyst Mikkel Hagel, is pausing new subscriptions starting from May but may open for subscriptions again in the future. Commenting on the decision, Viggers tells HedgeNordic that “we have seen an acceleration of capital inflows, and it is important for us to grow at a pace that matches our niche focus on the investment side.” The fund uses an opportunistic investing approach that focuses on special situations, with its flagship strategy involving the participation in rights issues and other related deals. Increasing assets under management without regard to the fund’s niche and limited opportunity set can hurt investors’ returns.
As Viggers explains, “we have chosen to pause new subscriptions to ensure the best possible conditions for creating high and uncorrelated returns for the co-investors who have entrusted us with their capital.” In addition to participating in rights issues and related deals, Formue Nord Markedsneutral also employs other alpha-generating strategies such as buying and exercising mispriced subscription rights, engaging in bridge financing deals, as well as exploiting the so-called January effect.
Despite having a diverse toolkit at their disposal, the team’s primary strategy entails offering funding arrangements (involving equity, short-term debt, or a combination of both) to Nordic small- and mid-cap companies – a not-so-big market for a fund with rapidly growing assets as a result of strong performance and new investor demand. “If the number of opportunities in our markets improves or we find new opportunities in current or new markets where we can operate, we can re-open to new investors at a later date,” Hagel tells HedgeNordic.
“If the current pace of subscriptions were to continue,” argues Hagel, “there is a risk of diluting returns in the future, and we would rather have a margin to this risk than look back thinking we should have acted sooner.” Formue Nord Markedsneutral aims to deliver uncorrelated returns by capitalizing on complex, misunderstood opportunities, and has kept its promises to investors so far. The Danish fund earned an annualized return of 11.4 percent since running the strategy in a beta-neutral manner in February 2016. The fund gained 13.6 percent last year when the Nordic Hedge Index fell 3.5 percent, ranking as last year’s third-best-performing Nordic hedge fund.