Stockholm (HedgeNordic) – Malmö-based portfolio manager Mikael Petersson has decided to transform his long/short equity fund, Coeli Absolute European Equity, into an active long-only equity fund. Petersson explains that his team at Coeli European, established in 2018 with the backing of Coeli Asset Management, has been more successful in generating excess returns from long positions compared to shorts, which demand a more thorough analysis, more attention, and a different trading mentality. The fund will undergo a name change to Coeli European.
The short positions in Coeli Absolute European Equity constitute merely three percent of the fund boutique’s total managed capital across its two funds, a private markets structure, and a mandate granted by Norges Bank Investment Management (NBIM). These short positions, however, “require significantly more working time,” according to Petersson, founder and portfolio manager at Coeli European. “Time that has a high opportunity cost when we look for interesting investments,” he emphasizes. “The logical consequence is to change the strategy to an actively managed European equity fund, which frees up analytical capacity to focus on our long holdings, which are most likely to benefit all of us invested in Coeli Absolute European Equity.”
“The logical consequence is to change the strategy to an actively managed European equity fund, which frees up analytical capacity to focus on our long holdings…”
After over 20 years on the buy-side as an analyst and portfolio manager at well-known asset managers such as Lansdowne Partners, Kairos, and SEB in London and Stockholm, Mikael Petersson launched Coeli Absolute European Equity with around $10 million in January 2018 with the backing of Coeli Asset Management. Coeli Absolute European Equity, a European-focused equity long/short fund managing a concentrated portfolio with a focus on pure stock picking, accounts for about 15 percent of Coeli European’s total assets under management.
Coeli Absolute European Equity achieved an annualized return of 16 percent during its initial four years of operation before booking a decline of 30 percent amidst the challenging market conditions of 2022. “If you study historical return data in detail, it is clear that a few stocks in our long portfolio have made a very strong contribution to performance over long periods,” argues Petersson. This insight is a primary factor behind Coeli European securing a sizeable mandate from Norway’s oil fund, which mirrors the concentrated long portfolio of Coeli Absolute European Equity. “Historically, we have been better at generating excess returns in the long portfolio compared to the short,” says Petersson.
“Historically, we have been better at generating excess returns in the long portfolio compared to the short.”
The strategy and fund policy change will be implemented 30 days following today’s announcement. Starting in September, Petersson will close the fund’s short positions and invest all the capital in existing long holdings. The performance fee of 20 percent will be replaced by a performance fee of 15 percent on returns exceeding the MSCI Europe SMID Cap Net Total Return Index. However, no variable fee will be charged to existing or new investors in existing share classes until the net asset value reaches its previous highest level (“high watermark”).
“As significant co-investors and as managers of the fund, we ourselves are very much looking forward to this change in strategy,” concludes Petersson. “This is because we are convinced that it provides better conditions for creating long-term added value for the unit owners. We hope and believe that all our investors too see this as a clearly positive change.”
