Stockholm (HedgeNordic) – One month to the end of the year, Svelland Global Trading Fund of Norwegian Tor A. Svelland takes the top spot in this year’s list of best-performing Nordic hedge funds. Svelland’s long/short equities- and commodities-focused strategy is up 45.2 percent so far in 2022 to take its annualized return since launching in August 2017 to 25 percent.
Svelland Global Trading Fund, which predominantly engages in futures and equity trading in LNG, crude oil, emissions, copper aluminium, and iron ore, gained an estimated 5.1 percent in November following an advance of 9.5 percent in October according to its latest letter to investors. “A strong build on the good October performance with momentum building in our core convictions,” Svelland discusses last month’s performance. In November, Svelland Global Trading Fund made gains in metals, LNG and crude tankers, as well as plastic recycling to offset losses from its brent exposure.
“A strong build on the good October performance with momentum building in our core convictions.”
The fund has performed well since the prospect of higher interest rates, fears of a global economic slowdown, and a strong U.S. dollar started exerting downward pressure on commodity prices in June. Svelland Global Trading Fund has advanced 20 percent since the mid-point of the year and about 17 percent since early June. “Our performance in the second half of the year is pleasing considering the market environment,” says Svelland. The Bloomberg Commodity Index (BCOM) is down about 12 percent from early June through the end of November and the investible commodity index S&P GSCI is down 21 percent over the same period. “The second half weakness in commodities offers more opportunities,” according to Svelland.
“There is no real change in our views,” points out Svelland, who oversees a team of seven at Svelland Capital. “From what we are seeing, our core views are getting stronger,” he emphasizes. “Energy and metals markets remain incredibly tight, and it does not appear the broader markets or more importantly, governments, are actively aware of the supply side tightness.” The crude oil market is a case in point.
“All autumn, crude and distillates have traded heavily backwardated, signalling a tightness in the physical markets,” says Svelland. Financial investors in the futures market, however, kept outright prices from rallying, according to the Norwegian money manager. “In early November, this physical tightness started easing with very big Russian exports looming ahead of the EU sanctions deadlines,” says Svelland. He still sees low inventories and a stretched supply worldwide. “While the oil markets might have to wait for the physical overhang to clear, there are big upside risks if especially Chinese demand picks up or if there are any supply disruptions.”
“We are well prepared for any unexpected volatility and remain liquid and nimble to invest in any opportunities that arise through slow December markets.”
Svelland also points out that liquidity has been drying up in markets heading into the final month of the year. The team at Svelland Capital is “well prepared for any unexpected volatility and remain liquid and nimble to invest in any opportunities that arise through slow December markets,” according to Svelland. He also hopesthat the first quarter of 2023 will offer some clarity on the three factors hanging over the markets: Fed policy, China’s zero-Covid policy, and the war in Ukraine. “Volatility will remain elevated,” concludes Svelland.