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‘Quant Winter’ Brings Down Factor Fund

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Stockholm (HedgeNordic) – Alternative risk premia funds, which employ a rules-based approach to harvest risk premia such as value, quality, or momentum, have struggled to deliver on their promise of strong risk-adjusted returns with low correlation to traditional asset classes in a liquid, cost-efficient and transparent form. One casualty of the recent underperformance is the Evli Factor Premia Fund.

Finnish asset manager Evli has announced the closure of its market-neutral factor fund, Evli Factor Premia. “On November 4, 2021, the Board of Directors of Evli Fund Management Company Ltd decided to terminate the operations of the Special Investment Fund Evli Factor Premium,” Evli writes in an announcement. The asset manager’s three long-only factor funds, which oversee a combined €517.3 million in assets under management, have performed strongly in recent years and will continue to capture sources of extra return stemming from risk factors such as value, low volatility, momentum and quality.

“The Evli Factor Premia Fund is getting closed, unfortunately.”

“The Evli Factor Premia Fund is getting closed, unfortunately,” confirms Peter Lindahl, who is heading Evli’s factor fund team. “Despite being a top relative performer in the Alternative Risk Premia peer group over the past 3-4 years, the absolute performance has been far from great,” continues Lindahl. Evli Factor Premia accumulated a cumulative loss of about 11 percent since launching in late 2017 after booking a loss of 12.4 percent in 2018, a difficult period for many alternative risk premia funds as several factors underperformed in unison.

“Hopefully, ARP strategies will make a comeback at some point, since I still believe it makes sense to harvest factor risk premia in a long-short fashion.”

“The fund is too small and we have not been able to grow it over the past years,” Lindahl comments on the decision to close the Evli Risk Premia Fund. “As someone called 2018-20 the “quant winter,” it has certainly felt like,” he adds. “Hopefully, ARP strategies will make a comeback at some point, since I still believe it makes sense to harvest factor risk premia in a long-short fashion,” emphasizes Lindahl. “I also believe factor risk premia works as a great diversifier in a traditional 60/40 portfolio.”

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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

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