Stockholm (HedgeNordic) – Since its launch in February 2022, multi-strategy hedge fund Antiloop Hedge successfully navigated turbulent waters with few surprises. The month of May, however, proved to be the fund’s most difficult month to date, resulting in a loss of 4.7 percent as all sub-strategies simultaneously experienced an unfavorable turn.
The portfolio management team of Antiloop, comprised of Anna Svahn, Martin Sandquist, and Karl-Mikael Syding, has maintained a relatively stable risk-return profile by carefully managing the fund’s risk. Employing a value-at-risk (VaR) measurement approach on the fund, strategy, and position levels, their target is a daily VaR between 0.7 and 1.0 percent, corresponding to a yearly volatility of seven to ten percent. During 2022, as a newly-launched fund with various complex strategies, the fund’s VaR averaged between 20 to 25 percent of the risk target. In January 2023, the team decided to increase the risk level with the range of 0.7 to 1.0 VaR, from around 0.3 to 0.6 VaR. “We pulled up the risk in the fund at the beginning of the year,” explains Anna Svahn.
“We pulled up the risk in the fund at the beginning of the year.”
In April, Antiloop Hedge also initiated a shift in its cash management strategy by allocating a portion of the fund’s cash into gold and silver, instead of short-term instruments. “We have been strong advocates for gold for years, and this decision aligns with our long-standing view that real money in the form of gold and silver holds better value than fixed income given negative real yields,” she elaborates. Over time, the cash management position is expected to account for approximately 30 percent of the fund’s assets under management.
“We have been strong advocates for gold for years, and this decision aligns with our long-standing view that real money in the form of gold and silver holds better value than fixed income given negative real yields.”
While this strategic shift is anticipated to yield long-term benefits, it also “raises the fund’s risk level and leads to much higher volatility than before,” according to Svahn. She further notes that this change adds some correlation to the performance of gold and commodities. Gold prices dipped below $2,000 per troy ounce in May, while silver experienced a decline from around $25 at the end of April to under $24 and $23 towards the end of May.
Perfect Storm
Antiloop Hedge employs a set of uncorrelated strategies, focusing on different asset classes, time frames, and methodologies, all managed by different individuals. While these strategies are designed to exhibit low correlation with each other and broader traditional asset classes, the month of May proved difficult for all strategies for various reasons. “In addition to our cash management strategy that detracted from performance, our other strategies also underperformed individually,” according to Martin Sandquist, one of the co-founders of Lynx Asset Management.
The “Cygnus” tactical asset allocation strategy, overseen by Anna Svahn, faced a difficult month due to the challenging commodity environment. Karl-Mikael Syding’s long/short equity fundamental strategy, which had been positioned to capitalize on the short growth/long value spread, suffered due to the strong performance of tech-focused stocks during the artificial intelligence boom. “The divergence between the Dow and the Nasdaq cost us a lot during the month,” adds Sandquist. Additionally, Sandquist’s Global Macro strategy also detracted from performance due to some unfavorable macro calls.
“May was just one of those months where everything went the wrong way.”
Overall, “May was just one of those months where everything went the wrong way,” summarizes Sandquist. The monthly decline of 4.7 percent, which falls within the risk targets established by the fund, is an outcome that can occur when all four approaches underperform simultaneously. “May was the perfect storm for all our strategies.”
Despite the challenging month, the team maintains their convictions on gold, commodities, and the short growth/long value spread. “We are still very bullish on oil, commodities, gold, and the broader precious metals sector,” says Sandquist. “For our long/short equity strategy, we also expect the tech rally to mean revert and value stocks to perform again,” he continues. While May might have been a bad surprise for Antiloop Hedge, the multi-strategy fund is well-positioned for a potential rebound if the team’s convictions materialize.
