Stockholm (HedgeNordic) – Many investments products are giving investors more of what they already have – long exposure equities or bonds. In a world where equities and bonds are not expected to offer particularly attractive returns, investors are looking for diversified sources of return that exhibit low correlation with traditional assets and potential for alpha without significant beta exposure.

As the CEO of A-L Hedge, Anna Svahn assembled an experienced team of five to launch and run a multi-strategy hedge fund – Antiloop Hedge – that caters to the diversification-seeking investor. The team includes Martin Sandquist, one of the co-founders of Lynx Asset Management, and Karl-Mikael Syding, former partner and portfolio manager at Brummer & Partners-backed hedge fund Futuris. “We assembled all these people together to form a unique team with different approaches, but who share the same ideas about the future,” Svahn tells HedgeNordic.

“We assembled all these people together to form a unique team with different approaches, but who share the same ideas about the future.”

In full-blown running mode, Antiloop Hedge is designed to run eight different strategies that exhibit low correlation between each other and the broader traditional asset classes. “It might look that we only picked eight without any thought behind it, but the real idea was to offer different strategies with low correlation to each other by investing in low correlated assets,” explains Svahn. Each of the eight strategies reflects the “bottom-up approach from each individual portfolio manager who used a similar strategy before,” says Martin Sandquist.

“The different, individual strategies are stemming from the portfolio managers themselves,” explains Sandquist. The multi-strategy investment approach was born out of each portfolio manager’s experience rather than the team’s top-down view of which strategies would perform better or worse in a given market environment. “We have eight different strategies, but they have no correlation to each other,” emphasizes Svahn.  “We realized that it would be a good fit to put them all in one multi-strategy approach,” adds Sandquist.

“The different, individual strategies are stemming from the portfolio managers themselves. We realized that it would be a good fit to put them all in one multi-strategy approach.”

“We do that by investing in different assets, different markets and focusing on different time horizons,” says Svahn. She goes on to emphasize that “the overall correlation between all of these strategies are basically zero.” The low correlation between the individual strategies not only enhances the risk-mitigation properties of Antiloop Hedge, but also ensures that the fund produces attractive risk-adjusted returns in all types of market environments.

Soft Launch

Antiloop Hedge had a soft launch at the beginning of November and is currently running two strategies before the full roll-out of the entire range of strategies. “We really see this as a marathon,” Svahn points out. “The whole point with the soft launch and not raising more money in the beginning was to make sure that we actually grow into it and that all the strategies are working together as they should,” she continues. “It could have been a big mistake to roll out everything at once without really testing to see what works and what doesn’t work.”

The two up and running strategies include the “Cygnus” tactical asset allocation strategy run by Anna Svahn and the long/short equity fundamental strategy managed by Karl-Mikael Syding. “It was a good start with Anna’s and Mike’s strategies because they are very long-term and not very trading intensive,” explains Sandquist. “We had the chance to try out everything, all the connections with the brokers and other service providers to see that everything is working,” he continues. “It was nice to start with these two strategies because the rest are more trading intensive.”

Syding’s long/short equity fundamental strategy focuses on the most liquid and attractive-valued U.S. and European public companies based on traditional value-based methods. Syding aims to build and maintain a market-neutral portfolio that contains about 20 positions, equally divided among long and short positions. The strategy relies on a thematic approach across sectors, with Syding aiming to capitalize on sector spreads by going long two to four sectors and shorting a similar number of sectors. Each sector bet reflects between two to four stocks, with each individual stock given an equal weighting.

Cygnus, meanwhile, is an asset allocation strategy trading U.S. equities, soft commodities and gold using exchange-traded funds (ETFs), futures and single securities. Anna Svahn expects commodities and gold to play a more significant role in well-diversified portfolios going forward. “We have zero interest rates, which are not going to go up anytime soon, and we are printing a lot of money,” says Svahn. “The average expansion of the monetary base since 1971 has been around ten percent, this year it has been 25 percent and I expect that to continue in the coming years,” she elaborates. “The constant printing of money is, of course, a very good signal for commodity prices to rise.”

Svahn also views soft commodities as a downside hedge because “they are so cheap that there is no real downside to them anymore.” Institutional investors such as pension funds are looking for alternatives to bonds, “which are guaranteeing investors to lose money,” to hedge equity risk and volatility. “That is going to be in commodities and gold,” argues Svahn. “It is really a forgotten asset class,” says Svahn. “The population is growing, we have climate change, we have less space to grow the crops on, quality demands are going up, all of these will definitely push commodity prices up. There’s no question about it.”

“The population is growing, we have climate change, we have less space to grow the crops on, quality demands are going up, all of these will definitely push commodity prices up. There’s no question about it.”

Martin Sandquist, meanwhile, expects the U.S. dollar and other currencies to devalue over time. “The dollar and fiat currencies will de-base over time because of all the money printing,” says Sandquist. “Commodities are supposed to do best in this environment,” he continues. The team’s positive outlook on emerging markets and precious metals are “all themes based on the U.S. dollar going down and fiat currencies going down.”

A Mix of Experience and Young Talent

The five-member team running Antiloop Hedge has a combination of youth and experience that creates an edge in the ever-changing market environment. “Mike and I are very old school, we have been in business for a long time,” says Sandquist. “Our experience is a good mix with Anna and the younger team,” he continues. “It is a good combination to have both experience and a new perspective on things from the younger team members who can contribute with a new line of thought, which is useful in the current paradigm shift going on in the markets.”

“It is a good combination to have both experience and a new perspective on things from the younger team members who can contribute with a new line of thought, which is useful in the current paradigm shift going on in the markets.”

In addition to the currently-running long/short equity fundamental and tactical allocation strategies, the team at Antiloop Hedge aims to roll out other strategies such as global macro, short-term futures, short-term equity, among others. “We have a multi-strategy approach because we just don’t know which strategies will perform better at any given point in time,” says Sandquist. “These strategies tend to perform well at different times, and tend to work together to achieve our aim of delivering stable returns.” The aim, in the end, is to deliver double-digit returns between ten to 15 percent with annual volatility between five and seven percent. “A Sharpe ratio of 1.5 would be our target, but we are happy with a Sharpe ratio of one as well.”