Stockholm (HedgeNordic) – Hedge funds are not generally known for their longevity. For the funds that do have a lifespan exceeding ten or 15 years, this operational longevity is a sign of something going right. This March, activist investor Accendo Capital is joining the select group – now 33 – of long-running Nordic hedge funds with a lifespan that exceeds 15 years.
“The strategy is exactly the same as when we launched, so we must have been doing something right,” says Henri Österlund (pictured), the founder of Accendo Capital. “We are independently owned and managed, working for the best interests of our fund shareholders within a single, defined strategy,” he emphasizes. That strategy involves an active, entrepreneurial, and predominantly collaborative activist approach to invest in public Northern European companies that are driving or benefiting from technological innovation.
“The strategy is exactly the same as when we launched, so we must have been doing something right.”
“There are enormous opportunities to increase shareholder value in listed companies,” considers Österlund. “Far too many companies focus on the formalities of corporate governance.” Accendo Capital, on the other hand, uses corporate governance to stimulate the process of shareholder value creation.
“Our activism most closely resembles the engagement and passion with which entrepreneurs would run their own company, while bringing in outside expertise and deep knowledge of capital markets,” explains Mark Shay, the Stockholm-based partner and portfolio manager of Accendo Capital. “We work with the investments as entrepreneurs would do and are deeply involved with the companies, much more than most other board members ever would be.”
Activist’s Track Record and Successful Campaigns
Accendo Capital’s approach to investing in a limited number of companies and supporting them to realize their full potential has paid off handsomely in the first 15 years of operation. The Luxembourg-domiciled fund has delivered an annualized net return of over 15 percent since launching in early 2008, exhibiting a correlation of 0.5 with the MSCI World Index or the S&P 500. “We consider all our investments individually and there is no model portfolio nor need for index tracking,” emphasizes Kai Tavakka, Accendo’s long-serving partner who has recently taken the role of Managing Partner.
“We are proactive and have a clear view of the direction for each company we invest, but we don’t go in with hostile agendas.”
“We always monitor and measure if the business is moving faster toward the direction we see best suited for the future,” says Tavakka. Accendo does not measure its impact in terms of changes to the board, number of board meetings, or management changes – although all these abound. “We are proactive and have a clear view of the direction for each company we invest, but we don’t go in with hostile agendas,” points out Tavakka. Most of Accendo’s investments and engagement campaigns have borne fruits, but some have been more successful than others.
Accendo’s first bigger investment in silicon wafer manufacturer Okmetic has been one of the most successful investments, generating an internal rate of return of 24 percent over a span of eight years. Under Accendo’s watch, Okmetic started investing in more specialized silicon wafer production capacity and started focusing on world-leading customers in the field. “These helped to reduce the dependency on lower margin and more volatile business areas,” recalls Österlund. “Overall the topline didn’t appear to change that much during our holding period, but the sales mix experienced a dramatic change,” he elaborates. “Eventually the strong market position in specialty wafers attracted international interest and we sold the whole company.”
Accendo’s current investments in Finnish video game developer Remedy Entertainment and Swedish provider of fiber communications solutions Hexatronic have also contributed strongly to returns in recent years. “We helped the listing process since 2016 with an IPO in 2017,” Österlund recalls the initial investment in Remedy. “We have actively engaged in the transformation of Remedy from a single-project private company into a public company gaining a greater, more diverse share of game revenues through better project terms and new partnerships.”
Accendo has been the largest or among the largest owners of Hexatronic and had board representation since 2016. “Our initial investment thesis was that the company could apply its knowledge and product portfolio from the mature Swedish fiber market to large, growing markets internationally that had lower fiber penetration than Sweden,” says Shay. “We recognized that Hexatronic had a strong position among Tier 2/Tier 3 customers, and that there is no viable substitute for fiber.” Hexatronic has successfully executed its geographic expansion strategy and has also engaged in M&A-driven growth that extended its geographic reach and product portfolio into new areas such as data centers, wireless communications, and harsh environments.
“We hope the next 15 years will be a continuation of the first 15 years.”
“The first ten years in the life of an activist investor are the most difficult, thereafter it only is difficult,” according to Österlund. He hopes that “the next 15 years will be a continuation of the first 15 years.” Accendo Capital will seek to continue delivering similarly strong returns, slowly expand the team if needed, and continue to run a concentrated portfolio. “Turning 15 for such a specialised fund as Accendo is quite an achievement, but it also still feels that there is a lot more that we can do and give,” says Elise Auer, Partner at Accendo. “We plan to continue to be performance-focused, not looking to maximize assets under management or expand with new fund offerings,” concludes Österlund. Why fix something that’s not broken?
