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Waterfall Rowing

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Stockholm (HedgeNordic) – There is a lot of heterogeneity in the Nordic hedge fund industry. In early 2021, Karl Oscar Strøm made the Nordic hedge fund universe even more heterogenous with the launch of Paleo Fund, a hedge fund predominantly relying on short-term technical analysis to trade index futures and other instruments. Down a cumulative 13 percent since inception, Strøm says now is the time to speed up the rowing.

“I sit in the boat with the investors and I am the one who has to row. Now it will be waterfall rowing,” Karl Oscar Strøm tells the Norwegian financial daily Finansavisen. “I am obviously not satisfied with how things have gone so far. I am working so that this will be a good story and that it will turn out to be a nice return series,” he comments on the fund’s inception-to-date performance.

“I sit in the boat with the investors and I am the one who has to row. Now it will be waterfall rowing.”

The first few years of a fund’s track record are essential for capital raising and longer-term success. However, underwhelming performance in the early life of a fund does not always lead to failure, according to Strøm. The Medallion Fund of Renaissance Technologies trailed the S&P 500 by a wide margin in its first two years of operation before becoming one of the world’s most successful and best-performing hedge funds. Strøm seeks to emulate the story of the Medallion Fund, which has achieved success despite facing a challenging first two years.

Karl Oscar Strøm, who set out to explain his investing approach in a book titled “Paleo Trading: How to trade like a Hunter-Gatherer,” uses a flexible, opportunistic approach to enter into various types of relatively short-term trades. Strom describes himself as a short-term, technical trader who uses technical and quantitative models with some fundamental analysis aiding the decision process. “All positions are based on technical and quantitative analysis, with fundamental analysis serving as an additional input to the decision-making process,” previously explained Strøm, who has a broad background in finance as a broker, trader, and business developer.

“The fund’s aim is the same as a professional, discretionary trader, which is to earn money more or less every day under all kinds of market environments,” Strøm tells HedgeNordic. “We have been through the initial phase with higher volatility in the results, as well as some start-up costs,” he explains. The two years of trading in Paleo Fund provided valuable experience for Strøm. “We have seen reduced volatility on the downside and more stability in the profits. Our aim now is to capture more of the upside, while keeping the control on downside protection.”

“Our aim now is to capture more of the upside, while keeping the control on downside protection.”

Paleo Fund originally employed a variety of strategies, ranging from short-term intra-day setups to medium-term swing trading and larger and rare asymmetric opportunities. Strøm has chosen to concentrate on trades in index futures, in addition to identifying special asymmetric situations in individual shares through short-term trades. “Now we build on this with a narrower focus based on our experience so far. We trade fewer instruments and more specific situations in the markets,” explains Strøm. “We are progressing steadily in this direction, and this is a path often seen in similar setups/traders that have managed to reach constant profitability.”

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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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