Stockholm (HedgeNordic) – Case Hedgefond, once a billion-dollar fund in the Nordic hedge fund industry, has undergone a restructuring process since being taken over by Stockholm-headquartered Case Fonder. After delivering a solid 5.1 percent return in the challenging market environment of the previous year, Case Hedgefond is maintaining its positive momentum into 2023. The multi-strategy hedge fund gained 4.1 so far year-to-date and is on track to secure an eighth consecutive month of positive performance.

“We started a thorough restructuring of Case Hedgefond at the end of last year and the bulk of the job is done,” says Fredric Calles, who serves as head of hedge funds and alternatives at Case Fonder. “Our aim is to deliver good stable risk-adjusted returns and I believe we have been successful in doing so this year,” he emphasizes. In a year marked by challenges for many managers, Case Hedgefond has managed to stay out of trouble. “This is due to the hard work with our cornerstones and us trying to balance risk versus expected returns.” These cornerstones include selection, portfolio construction, and risk management.

“The fund is now a multi-strategy fund with sub-strategies in credit, equities, and derivatives.”

Launched in early 2004 by Catella, Case Hedgefond has historically blended long/short equity and fixed-income investing to achieve low-risk and attractive risk-adjusted returns. While the fixed-income strategy has remained broadly unchanged in recent years, the long/short equity segment has undergone multiple transformations. Guided by Calles, Case Hedgefond has been on a journey to become a true multi-strategy fund. “The fund is now a multi-strategy fund with sub-strategies in credit, equities, and derivatives,” says Calles.

True Multi-Strategy

With a solid 5.1 percent return in 2022, Calles anticipated a promising 2023 for Case Hedgefond, particularly from their credit portfolio. “We have great confidence in our credit portfolio. 2022 was a bad year for credit, so this year we are aiming at recovering most part of that money in the credit portfolio,” Calles told HedgeNordic back in March. Providing an update eight months later, Calles says “the credit portfolio has performed well, though not excellent.” According to Calles, “We have had some recovery but have not quite hit the sweet spot with our holdings.”

In enhancing the equity component of the portfolio, the Case team introduced a systematic pair trading strategy. “Part of the pair-trading strategy is done together with our sell-side colleagues, where they come up with ideas for pair-trades in accordance with a structured process and a quantitative overlay,” explains Calles. “We are gradually increasing the relevance of pair-trading for the broader portfolio.”

“We are gradually increasing the relevance of pair-trading for the broader portfolio.”

Leveraging his strong derivatives background from previous roles at Alfred Berg, UBS, and Handelsbanken, Calles has encouraged the use of derivatives in managing Case Hedgefond. “In derivatives, we mainly use the team’s extensive experience from derivatives and quantitative low-risk techniques to apply simple strategies in standardized derivatives to enhance returns and reduce risk,” he details. 

Case Hedgefond revolves around three cornerstones in its overall strategy: selection, portfolio construction, and risk management. Calles underscores their equal importance, noting that “we are thorough in our portfolio construction and risk management, meaning that seemingly good ideas from our selection processes might sometimes be declined due to tight restrictions in the overall portfolio construction.” According to Calles, “diversification is a key element in our strategy, meaning that we want many small positions to avoid singular risks and instead aim for systematic returns.”

“Diversification is a key element in our strategy, meaning that we want many small positions to avoid singular risks and instead aim for systematic returns.”

Looking ahead, the Case team’s near-future focus lies in increasing the relevance of “pair-trading by adding more contributors from sell-side and further developing our approach.” Calles also emphasizes their openness to discussions “with talented individuals to help shape the future of our multi-strategy fund.”