Stockholm (HedgeNordic) – The resilience of Pensum Global Opportunities was put to the test in the first half of 2023 after a robust performance in 2022. The opportunistic long/short equity fund overseen by Peter Andersland was down 20 percent during the initial six months of the year. In July, however, Andersland confidently stated that “we expect to come out on top when the fat lady finally signs.” The subsequent two months saw a noticeable resurgence, with advances of 4.5 percent in August and another 9.3 percent in September.
“During the first half of the year, our long book was basically dead wood, generating only a few percentage points return. However, it woke up from its slumber since summer,” explains Peter Andersland, who runs Pensum Global Opportunities alongside Inger-Anne Varmann Vikre and Ermanno Mattio. The fund’s short positions, expressed both outright and via long-dated out-of-the-money options, also contributed significantly to its performance in the past two months. “During the first half, we incurred (mostly paper) losses on the shorts and falling implied volatility meant that our long-dated out-of-the-money put options were marked down heavily,” says Andersland. “Since summer, however, the short book has again performed really well, more or less across the board.”
“During the first half of the year, our long book was basically dead wood, generating only a few percentage points return. However, it woke up from its slumber since summer.”
Pensum Global Opportunities gained 14 percent in the past two months alone, with the short book contributing 40 percent of the return and the remainder originating from the long book. Andersland’s investment approach revolves around identifying inflection points in profit pools shared by groups of companies to find attractive opportunities on both the long and short sides. “We focus on a few profit themes that we believe are significant both in terms of size and duration,” says Andersland. “These are our ‘fishing ponds’ from where we pick our stocks. As we do not try to match long and short positions in terms of style, geography and industry, tracking error between the two sides of the portfolio can at times be very large.”
“We focus on a few profit themes that we believe are significant both in terms of size and duration. These are our ‘fishing ponds’ from where we pick our stocks.”
The portfolio of long positions features a relatively diversified range of stock-specific risks, comprising 30-40 different names but concentrated within sectors such as oil and gas, gold and silver miners, as well as uranium or uranium miners. “The rationale behind this allocation is years of underinvestment amidst intact demand,” according to Andersland. “Oil and gas have done well, but uranium has delivered spectacular results, representing by far the largest chunk of the profits in the long book. Gold and silver miners, on the other hand, have done poorly so far, but we believe the investment thesis is intact, so we hold on.”
“Oil and gas have done well, but uranium has delivered spectacular results, representing by far the largest chunk of the profits in the long book.”
The portfolio of short positions includes companies with business models reliant on low-interest rates, money-losing tech, ‘zombie’ companies, cyclicals dependent on stretched consumers, and even high-quality companies that have become overvalued due to the “There is no Alternative” (TINA) effect. “The big theme in the short book is that we have moved into a new economic regime. The 40-year trend of falling interest rates appears to have come to an end. After 40 years of economic policy favoring capital over labor, it now appears that the pendulum has swung the other way.”