A Future Up in the Air

Stockholm (HedgeNordic) – The future of the only pure currency hedge fund in the Nordic Hedge Index seems very much under doubt after the Board of Directors of Kapitalforeningen Jyske Portefølje – part of Danish asset manager Jyske Invest – proposed the liquidation of FX Alpha II KL. The Board has convened an extraordinary general meeting on November 27, with the agenda for the meeting featuring the liquidation of FX Alpha II KL.

“At the Board meeting on 11 November 2020, the Board of Directors of Kapitalforeningen Jyske Portefølje has decided to recommend the liquidation of FX Alpha II KL in accordance with sections 140 and 141 of the Act on Managers of Alternative Investment Funds,” says a letter by Managing Director Jan Houmann.

Jyske Invest’s FX Alpha aims to generate consistent absolute returns by exploiting short-term imbalances in foreign exchange markets. Though FX strategies are typically viewed as highly volatile, FX Alpha represents a low-risk alternative to FX exposure, having experienced a maximum drawdown of 2.7 percent over the past nine years. Despite managing to protect capital in turbulent periods such as the fourth quarter of 2018 or the beginning of 2020, FX Alpha has not been able to generate sufficient returns. The fund is down 0.7 percent year-to-date through the end of October and gained 0.7 percent in the past 36 months. FX Alpha has seen its asset under management fall from DKK 645 million at the end of January this year to DKK 358 million at the end of October.

Christina Andersen and Jakob Amdi Frederiksen (pictured) are the two lead portfolio managers fully dedicated to the strategy employed by FX Alpha. The strategy has been based on a fully discretionary setup, ultimately relying on the portfolio managers’ experience. The team’s disciplined risk management, partly stemming from stringent stop-loss management, has resulted in very low volatility of returns. FX Alpha delivered an annualized return of 1.7 percent since March 2011 with an annualized standard deviation of 1.05 percent. This low volatility has led to an inception-to-date Sharpe ratio of 1.65.

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About Author

Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index (NHX), as well as being a novice columnist covering the Nordic hedge fund industry for HedgeNordic. Prior to joining HedgeNordic, Eugeniu had served as a columnist for a U.S. journal covering insider trading activity, activist campaigns and hedge fund moves. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018.

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