- Advertisement -
- Advertisement -

Heavy Losses for Frost

- Advertisement -

Stockholm (HedgeNordic) – Higher than expected inflation readings in a number of wealthy economies and signals from several central banks about sooner than expected policy tightening caused increased volatility in bond markets at the end of last month with sharply higher short-term rates. Brummer & Partners-backed Frost, a fixed-income relative value fund focused on Scandinavian fixed-income markets, was heavily impacted by the bond market turmoil, with the fund booking a loss of 17.7 percent for October.

Frost suffered from “the recent weeks’ surge in Swedish short term interest rates and flattening of the yield curve,” according to a monthly commentary by Brummer & Partners. “A catalyst for the extreme moves, which spilled over to EUR and SEK rates, was Bank of England’s hawkish comments on the back of rising inflation expectations,” the commentary adds. “In Sweden, there is now a significant divergence between the Riksbank’s communicated trajectory for short term interest rates and what the market is pricing in.”

“Frost had its worst month since inception, mainly suffering from the recent weeks’ surge in Swedish short term interest rates and flattening of the yield curve.”

Explaining the increased volatility in the Swedish bond market, a team at SEB writes that “market expectations for Riksbank’s rate hikes, which have gradually increased over the last 5-6 months, have taken a large step higher.” The SEB team goes on to say that “we believe stop losses have exaggerated the movements and even though upside risks to inflation are increasing we predict core inflation to remain below the Riksbank’s forecast also in October.” According to the team at SEB, “the Riksbank is unlikely to turn hawkish in the upcoming Monetary Policy report on 25 November. Provided that the international situation calms down, we think that swap rates will reverse parts of the recent upturn.”

“The fact that BMS finished the month in positive territory is a testament to the strength of the diversification in BMS’s portfolio.”

Despite Frost’s monthly loss of 17.7 percent, Brummer Multi-Strategy (BMS), the multi-strategy fund investing in the single-strategy hedge funds under Brummer & Partners’ umbrella, edged up 0.2 percent last month. “Frost’s negative contribution to BMS’s return is however limited since the allocation to Frost has been kept low,” writes Brummer & Partners in the monthly commentary. Brummer Multi-Strategy had 4.5 percent of its SEK 35.8 billion in assets under management allocated to Frost at the end of September. “The fact that BMS finished the month in positive territory is a testament to the strength of the diversification in BMS’s portfolio.” During October, trend-following strategies Florin Court and Lynx were significant positive contributors, both capitalizing on bond market volatility.

 

Photo by kaleb tapp on Unsplash

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

First Non-Swedish Family Office Investment for Protean Small Cap

Stockholm (HedgeNordic) – About one year after the successful launch of their long/short equity fund Protean Select, Pontus Dackmo and Carl Gustafsson introduced a...

Atlant Högräntefond Leads Peers on Third Anniversary

Stockholm (HedgeNordic) – Around mid-March 2021, Swedish hedge fund boutique Atlant Fonder launched a UCITS-structured fixed-income fund investing in Nordic corporate bonds, drawing from...

Rhenman Welcomes Brummer & Partners Sales Veteran

Stockholm (HedgeNordic) – After close to 18 years as an institutional sales professional at Brummer & Partners, Tom Josephson is set to join healthcare-focused...

Untapped Potential in Symmetry’s Small-Cap Portfolio

Stockholm (HedgeNordic) – Small-cap-focused hedge fund Symmetry Invest has achieved an annualized return of around 20 percent over the past five years and over...

Navigating Asia-Pacific’s Transition to Sustainable Growth

Stockholm (HedgeNordic) – Emerging markets in the Asia-Pacific region, such as China, India, Indonesia, the Philippines, Thailand and Vietnam, have experienced significant economic expansion...

The Performance of US Equities in Election Years Over the Last Century

By Daniel Ung, Kartik Chawla, and Jędrzej Miklaszewski – SPDR: The 2024 US presidential election is on the horizon, and investors are keen to...

Allocator Interviews

Latest Articles

In-Depth: Emerging Markets

Voices

Request for Proposal

- Advertisement -