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In-Depth: Nordic Equity Markets

Report: Systematic Strategies

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Stockholm (HedgeNordic) – As November marks the beginning of the winter season, HedgeNordic embarks on an In-Depth series of articles that focus on “Nordic Equity Markets.” Tapping into insights from allocators, service providers, long-only and long/short equity managers, this series unveils the strategies, shifts, and market dynamics that are currently shaping the Nordic equity landscape. Above all, this series highlights the advantages of investing in Nordic equity markets, while also showcasing diverse investment strategies designed by different managers to capture opportunities in this space.

In “Mastering the Power of Proximity and Flexibility,” Norwegian Jan Petter Sissener discusses his absolute return long/short equity fund, Sissener Canopus, which maintains a “Nordic bias” while maintaining the flexibility to explore opportunities beyond the Nordics. Sissener underscores the significance of geographical proximity in their investment philosophy, stating, “The required rate of return on an investment increases exponentially with the distance from the city of Oslo.”

PriorNilsson Idea, a Sweden-focused long/short equity fund spearheaded by founder Torgny Prior and joined by Martin Lindqvist in 2014, has sought to demonstrate that market returns need not be synonymous with excessive turbulence. Torgny Prior explores “Idea’s Pursuit of Market Returns with Less Turbulence.” Originally launched in early 2006, PriorNilsson Idea began to employ more extensive hedging strategies to reduce return volatility from the beginning of 2014. Since the end of 2023, the fund has generated an annualized return of 11.1 percent with an annualized volatility of 10.5 percent.

In “Mind the GARP in Nordic Stocks,” Jan Brännback and Janne Lähdesmäki from Schroders explain their investment philosophy of seeking quality growth at a reasonable price – quality GARP – to find winners in the universe of Nordic small- and micro-cap stocks. The Finnish duo also highlights the attractive fundamental characteristics of the small and micro-cap sub-segment of the Nordic equity market, as well as discusses the valuation discount of small- and micro-caps compared to their larger counterparts.

Anders Bjorkstal and David Franklin of Solarstein Capital uncover the “Nordic Secret” by discussing five data-driven qualities behind the Nordic region’s attractiveness to investors, emphasizing the importance of active management in this attractive niche.

The prevalence of home bias, marked by a preference for overweighting domestic assets, is rather common for many institutional investors worldwide. That holds true for Elo Mutual Pension Insurance Company and its peer pension insurance companies in Finland’s earnings-related pension system. In “Elo’s Equity Investments: A Dive into Home Bias and Global Diversification,” Niko Syrjänen, Head of Equities at pension insurance company Elo, outlines their approach to investing in Finnish equities.

In a separate article, Janne Kujala and Ville Tiainen from Evli explain “Evli’s Rule of Returns: Selection Guides, Holding Secures,” highlighting the importance of portfolio management and position management when investing in Nordic equity markets.

In “The Power of Consensus Analysis in the Age of Information Overload,” consensus estimates provider Visible Alpha addresses a common challenge faced by both Nordic and global managers: too much information and not enough time to digest it. Visible Alpha sources raw working sell-side equity models directly from sell-side institutions and generates standardized consensus forecasts and seeks to act as “a force multiplier” for Nordic investors investing globally, as well as global and local investors investing in the Nordics.

Hans-Marius Lee Ludvigsen of DNB Asset Management contributes a piece on “A Promising Symbiosis: Small Caps and the Nordic Market,” where he summarizes the attractiveness of the Nordic equity market, particularly of Nordic small caps.

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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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