Exploiting Asset Opportunities

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Stockholm (HedgeNordic) – After amassing more than 20 years of financial market experience, Per Gramstrup launched advisory firm Asset Advisor Fondsmæglerselskab A/S in January 2009 as a one-person boutique to advise and offer institutional clients access to his opportunistic multi-asset risk-on, risk-off strategy. Fast forward to late 2016, Gramstrup and his team launched the time-tested strategy in a fund format, as a Danish alternative investment fund named Asset Opportunities.

“When I started the company in 2009, we had insurance companies in Denmark as clients and we have been using the core of the same strategy both for the clients we advise and for our fund,” explains Gramstrup, who now runs a team of five at Aarhus-based Asset Advisor Fondsmæglerselskab. “We run an active, dynamic and opportunistic multi-asset strategy with a continuous risk-on, risk-off analysis to find the best opportunities in all asset classes and tradeable securities,” elaborates the CEO of Asset Advisor.

“We run an active, dynamic and opportunistic multi-asset strategy with a continuous risk-on, risk-off analysis to find the best opportunities in all asset classes and tradeable securities.”

The Asset Advisor team’s continuous evaluation of the risk-on, risk-off sentiment in financial markets relies on a set of objective and subjective assessments based on analyses of long-term trends, economic cycles, monetary policy, investor sentiment and asset flows, and equally important, market participants’ behaviour and their biases. “Being so long in the market, I hatched up a set of decision models that have proved useful for me over time,” says Gramstrup.

“Being so long in the market, I hatched up a set of decision models that have proved useful for me over time.”

Having accumulated more than 35 years of experience in financial markets, Gramstrup is keen to emphasize the importance of considering behavioral finance theories and market psyhology in “reading” the market. “Using Daniel Kahneman’s and Nassim Taleb’s insights on behavioral finance in our decision making contributes to us being able to take advantage of irrational fluctuations that occur in the markets,” argues Gramstrup. “Interpreting and translating the investor psychology in the market is critical.” The focus on investor behaviour helps the team “understand how and why investors are thinking as they do, and ocassionally find situations when investors are seemingly making the wrong decisions.”

Risk-Opportunity Map

The objective and subjective assessments of where financial markets are heading help Gramstrup and his team build a risk-opportunity map. “We maintain a map of where we see risks and where we see opportunities in markets at all times,” explains Gramstrup. “And to be sure that we are well-prepared at any time to exploit opportunities and avoid risk, we need to prepare a game plan of our next chess moves,” he elaborates. “In my experience, when you are trying to perform better than throwing a dice, you have to be well-prepared and have your chess moves ready so you can react when market conditions are changing.”

“…you have to be well-prepared and have your chess moves ready so you can react when market conditions are changing.”

When all pieces are laid down and arranged on the risk-opportunity map, Gramstrup identifies and allocates to attractively-valued risk-reward opportunities across asset classes and individual securities, ranging from Danish and international stocks, stock index futures, interest rate futures, corporate bonds to put and call options among others. “Asset Opportunities can invest in all exchange tradable asset classes and instruments.”

Launched in October 2016, Asset Opportunities has delivered an annualized return of 8.0 percent since inception, with the fund being on track to reach its best annual performance after advancing 19.7 percent in the first eight months of 2022. Taking a glimpse at the main contributors to the fund’s performance in 2022 reveals the wide range of instruments and asset classes Asset Opportunities can invest in.

A basket of short futures positions against two-year Italian government bonds, for instance, was this year’s best contributor to performance for Asset Opportunities, followed by a long position in Danish vaccine developer Bavarian Nordic, a long position in Danish cable solutions provider NKT, as well as a short futures positions against German stock index DAX 30 and put options against electric car manufacturer Tesla. While the range of opportunities – and instruments used – the team led by Gramstrup can be varied, all investors in Asset Opportunities can monitor its portfolio, bets and the rationale behind the bets on a daily basis.

Full Transparency and Role in a Broader Portfolio

“We are continously evaluating the portfolio and usually making changes to the portfolio on a daily basis,” says Gramstrup, “but we seek to offer 100 percent transparency into what we do every day.” All investors of Asset Opportunities have access to the last 50 trades the portfolio management team have added to the portfolio and can see the complete portfolio at any given time. “We are putting a lot of effort into being fully transparent. The traditional hedge fund industry is known for being secretive, we are proceeding in completely the opposite direction,” emphasizes Gramstrup. “Given our very broad mandate and very active and flexible approach, we owe our investors tranparency. We need to show them exactly what we do every day and what portfolio we have.”

“Given our very broad mandate and very active and flexible approach, we owe our investors tranparency. We need to show them exactly what we do every day and what portfolio we have.”

Given its track record since 2016, Gramstrup sees Asset Opportunities as a perfect fit in a broader portfolio consisting of stocks and bonds. “It is actually fitting very well in a standard 60/40 portfolio approach,” argues Gramstrup. With the fund delivering an annualized 8.0 percent since inception and a Sharpe ratio of 0.96, the fund can enhance an investor’s efficient frontier with the addition of Asset Opportunities to the portfolio. In other words, the addition of Asset Opportunities to a broader portfolio would have created a portfolio with higher expected returns for a similar level of risk.

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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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