Stockholm (HedgeNordic) – In a chance to catch up with one of the managers qualifying for this year´s “Nordic Hedge Fund Rookie of the Year” we talked to Karl Oscar Strom, of Paleo Fund AIF. The fund currently is available only to Norwegian professional investors and runs around seven million Euro just ahead of its second round of investments into the vehicle.
Strom runs a multi strategy approach, focusing on western markets with an emphasis on tech plays. The majority of trades is around equity instruments, which can be single stock or indices, typically futures on the largest markets such as Nasdaq 100 and S&P 500 but also as also futures traded on some commodities, crypto currencies, AEX, DAX or OMX are within the mandate.
“Even within the largest Nordic stocks, such as Equinor, it may be more interesting and cheaper to buy three oil futures rather than 10.000 shares to get the same capital exposure in a cheaper and more liquid way to what are very correlated movements”, Strom explains.
Strom describes himself as a short term, technical trader, using technical and quantitative models with some fundamental analysis aiding the decision process. There is no pre-defined or sentimental bias towards long or short trades, but Strom does admit “while I probably trade indices on both sides on around equal terms, there probably is a long overweight when it comes to single stocks”.
In the current environment with large moves, wide spreads and low liquidity he uses a more careful and tactical approach to the market. This in contrast to when the markets are in stable uptrends, where larger index exposure and a portfolio of stocks would be preferred. The strategy is very flexible in this regard. “We adapt to the market environment” says Strom.
Strom´s goal is to create a positively sloping equity curve over time and describes his number 1 goal not to lose money for investors and making money as the second objective. “I am not all that satisfied with the first year´s results, as I know I can do better. But it is going in the right direction”. The trader just completed a workshop reviewing the strategy and trading, one of the key takeaways was to “do the same thing with better results.” He managed to identify some key areas to improve on after reviewing the trading history : “I see that small and rather “mechanical” adjustments in position sizing and the handling of stop-losses would have a considerable and systematically positive effect. Increasing profits and reducing negative outliers. These are easy to implement” Strom says. “I also see that some minor adjustments to position entry- and exit strategy would have a positive effect on hit-rate and the number of positive outliers.
Strom believes the current challenging market environment is likely to continue for some time, thus making a tactical day-to-day approach a well suited strategy.
“If in one year from now markets are calmer, the portfolio will probably consist of some core long index positions with some single stock swing trades around them – the race is long, and we are getting in shape! The fund has a very flexible mandate, and provides a good platform for expansion in the coming years”, he concludes.
