Stockholm (HedgeNordic) – Sweden’s second-oldest hedge fund, Excalibur Fixed Income, recorded its best month in March since 2008. The fixed-income macro hedge fund managed by Thomas Pohjanen, Björn Suurwee and Marek Ozana gained 4.2 percent last month to bring its year-to-date return to 4.4 percent and its annualized return over the past 36 months to 6.6 percent.
“We have been of the opinion that central banks have been too complacent when it comes to inflation risks and we have been building strategies around those themes for a number of months.”
“We have been of the opinion that central banks have been too complacent when it comes to inflation risks and we have been building strategies around those themes for a number of months,” explains Pohjanen (pictured), who founded Excalibur Fixed Income alongside Björn Suurwee in 2001. “These strategies paid off in March, thereby summing up to a good result.” Excalibur Fixed Income has enjoyed a ninth consecutive month of positive returns and currently ranks as this year’s best-performing fixed-income hedge fund in the Nordic Hedge Index.
Incoming inflation figures from the March inflation reports continued to surprise to the upside in all the markets Excalibur Fixed Income focuses on. “The rate of inflation in the US is now at a level the market has not witnessed in 40 years,” writes Pohjanen in the latest letter to investors. “In Sweden, inflation also continued to be measured well above what the Riksbank expected. Even if energy is excluded, inflation is well above the Riksbank’s target of 2.0 percent when it clocked in at 3.4 percent,” he continues. Euro area annual inflation also rose month-over-month. “It worth noting that what we have received so far are the inflation outcomes measured before the outbreak of war on February 24, the inflationary effects of the war in Ukraine are likely to fuel the inflation fire further.”
“The focus on higher interest rates overall contributed positively to the result in all sub-markets, in addition to a stronger Swedish krona.”
Central banks around the world are now in a difficult position, according to Pohjanen. “The expectation of transient inflation that people used to live by has been thrown aside,” he emphasizes. Excalibur Fixed Income was positioned for higher inflation outcomes that characterized the market in March. “The current period of rising inflation and higher market interest rates leads to large losses in long-only fixed income portfolios,” says Pohjanen. Excalibur Fixed Income seeks to represent “fixed-income replacement,” or “a way to make money in rising interest rates,” according to Pohjanen. “The focus on higher interest rates overall contributed positively to the result in all sub-markets, in addition to a stronger Swedish krona.”