- Advertisement -
- Advertisement -

Related

The Secret Sauce of Nordea’s Alpha Strategies

Industry Report

- Advertisement -

Stockholm (HedgeNordic) – Nordea’s Alpha 10 MA Fund gained 3.3 percent in March and 4.2 percent in April, making the multi-asset, multi-strategy fund one of the few funds that made money in both periods. Alpha 10 MA Fund, one of the three Alpha products managed by Nordea’s multi-asset investment team headed by Asbjørn Trolle Hansen (pictured), is up 5.7 percent year-to-date through May 27.

In Nordea’s weekly webinar Morning Espresso, Hansen says that “unfortunately, we do not have the ability of just X-Raying what is going to happen a month from now.” The strong year-to-date performance of Nordea’s Alpha family – comprised of Alpha 7 MA Fund, Alpha 10 MA Fund and Alpha 15 MA Fund – stemmed from the combination of several types of uncorrelated strategies. “Our approach is that we have these diversifiers, some of the classical ones with bonds, but we also have some more special ones that we have been working with over the last ten years,” explains Hansen.

Nordea’s multi-asset investment team leverages on 15 years of research to bundle traditional and alternative premia in six SuperStrategies that are split into a Risk Balancing bucket and a Directional one. The Risk Balancing bucket includes four strategies that mix risk-on and risk-off premia, while the two strategies in the Directional bucket are designed to predominantly harvest directional premia. “Our recipe is not so secret but rather one of diversification,” emphasizes Hansen in Nordea’s weekly webinar. According to Hansen, bonds act as a diversifier some of the time, but not always. “It was very good that we had these very special auto-diversifiers that we have been working on for so long.”

Hansen points out that incorporating more strategies that perform in risk-off environments paid off. “We are going to continue to work on that, to expand that concept,” says Hansen. “We want to gain robustness and maybe reel in more strategies that can help balance the portfolio.” According to Hansen, “you never know what’s in front of you, which is why diversification is good.” And more importantly, “you don’t always need to know what’s in front of you.”

Diversifiers Don’t Always Work Like a Clock

Although Nordea’s Alpha 10 MA Fund ended both March and April in the green, there was some unusual volatility in performance during the month of March. “There was a bit of reallocation between some of these defensive strategies protecting the equity book,” says Hansen. “What led to the performance volatility was the slippage in this hedging that you can sometimes have,” he emphasizes. “You can do this currency overlay to protect the equity beta and the effectiveness of that can vary quite a bit.” Similarly, a long/short equity strategy “may also be asynchronous in protectionability.” The diversification “does not always work like a clock,” acknowledges Hansen.

“There can be slippage in the way this hedging works, and this led to the volatility,” Hansen sums up. In addition, “some of these strategies have positive convexity,” he adds. “When equities sell-off, the effectiveness of some of these strategies accelerates because of the positive convexity,” explains Hansen. “These two things triggered some volatility.” Eventually, however, the diversifiers “worked as expected” and brought along the expected diversification benefits.

Nordea’s Alpha family of three vehicles all share the same investment approach but exhibit different risk-return profiles. The flagship product, Alpha 10 MA Fund, had €2.87 billion in assets under management at the end of April, while the three-fund family managed about €5.3 billion in assets at the end of last month.

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Eugeniu Guzun
Eugeniu Guzun
Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018. Write to Eugeniu Guzun at eugene@hedgenordic.com

Latest Articles

Rising Adoption of Quantitative Investment Strategies Among Nordic Investors

From a high-level perspective, there is a clear trend of increasing adoption of quantitative investment strategies (QIS) among Nordic institutional investors, either through the...

EU Plans Stress Test for Hedge Funds and Non-Bank Firms

European regulators are planning a stress test to identify vulnerabilities beyond the traditional banking sector, focusing on less regulated entities such as hedge funds,...

ALCUR Fonder Continues Hiring Spree

Following two earlier additions this year, ALCUR Fonder continues to expand its portfolio management team at a notable pace. The Stockholm-based hedge fund boutique...

Nordic Private Markets Modernize with Data-Centric Trade Lifecycle Automation

By Anders Stengaard Jensen at Indus Valley Partner: In recent years, asset managers in Nordic countries have accelerated efforts to modernize trade operations, particularly...

Norwegian Hedge Fund Industry Sees Major Boost with New Launch

The Swedish and Danish hedge fund industries remain closely matched in size, with Denmark recently edging ahead of Sweden. While still less than half...

Atlant Funds Hold Up in May Despite Mistimed Market Call

Macroeconomic and market forecasts are notoriously difficult, even for experienced hedge fund managers. What matters more than being right, however, is ensuring that incorrect...

Allocator Interviews

In-Depth: High Yield

Voices

Request for Proposal

- Advertisement -
HedgeNordic
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.