Stockholm (HedgeNordic) – Launched by Norwegian Jan Petter Sissener in 2012, Sissener Canopus is an absolute return long/short equity fund that has a global mandate with a Nordic focus. Sissener characterizes Sissener Canopus as having a “Nordic bias,” although it maintains the flexibility to explore opportunities beyond the Nordic region.
Employing a sector-based approach to security selection, Sissener decided against confining the fund to the Nordic equity markets and opted to have the ability to invest outside the Nordics as well. “When we do all the analysis of Nordic companies within a particular sector, we also have to do the work on their industry peers outside the Nordics,” explains Sissener. “If we find a peer performing better and trading at a more attractive valuation, Canopus has the freedom to invest outside the Nordics. I didn’t want to lock myself into Norway or the broader Nordic region.”
“The required rate of return on an investment increases exponentially with the distance from the city of Oslo.”
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.” Sissener’s investment philosophy is based on the belief that informational advantage can lead to superior investment results over time. “We believe that the ability to gain knowledge advantage of a company is proportional to the geographical proximity of said company,” he reiterates. “If we go to Australia, we need to see a huge potential in an investment there because we are in very vague territories where we don’t have an edge.”
“First and foremost, we believe we have an edge in the Nordic markets.”
Despite the fund’s global mandate, Sissener emphasizes that “first and foremost, we believe we have an edge in the Nordic markets.” To cultivate their knowledge advantage, the Sissener team seeks direct access to a company’s management, customers, and suppliers, and leverages sell-side research. Jan Petter Sissener’s extensive experience in the Nordic financial industry, spanning four decades, has allowed him and his team to establish relationships with management teams and boards of directors across Norwegian and Nordic companies, providing valuable insights into these firms’ future trajectories. “In the Nordics, I have been around in the finance industry for 40 years, so when I call someone, I normally get a response,” says Sissener.
To effectively manage an absolute return fund that can deliver consistent returns across different market conditions, a profound grasp of the macroeconomic landscape is imperative to anticipate market trends. Sissener Canopus operates as a directional long/short equity fund with downside protection, with Sissener and his clients willing to forgo some upside for downside protection. Sissener Canopus has successfully managed to both deliver returns and protect capital against major drawdowns.
Achieving an annualized return of 11.5 percent since its inception, Sissener Canopus ranks among the top ten Nordic hedge funds with the highest annualized returns for funds older than ten years. The fund has also been among the top ten performers of the past three years with an annualized return of 13.1 percent. Since its launch in 2012, Sissener Canopus endured a single down year, with a decline of 5.6 percent in 2018. In the challenging market conditions of 2022, Canopus ended the year with a return of 8.2 percent. This performance was due to a 7.9 percent gross contribution from the short-selling book and a 5.5 percent contribution from index hedges, effectively offsetting the 2.9 percent detraction from long positions.
Sissener Canopus operates with a flexible mandate, capable of being net long, market-neutral, or net short depending on the market outlook of Sissener and his team. “We use a top-down approach to determine the overall exposure at a given point, which we combine with a bottom-up valuation approach to select our long and short positions,” explains Jan Petter Sissener. At this point, however, Sissener’s top-down and bottom-down perspectives present mixed signals.
“We are seeing contrasting signs from our top-down and bottom-up analyses,” emphasizes Sissener. On one hand, economic concerns loom large, with consumers affected by higher inflation and interest rates, thereby impacting various industries. “On the other side, we see a lot of cheap high-quality companies trading at single-digit price-to-earnings (PE) multiples, so we do not see a big downside to the market.” Although Sissener doesn’t foresee any imminent catalysts that can trigger an upturn in equity markets, he views the current environment as “the year of the stock picker.”
“We are seeing contrasting signs from our top-down and bottom-up analyses.”
Sissener and his team, however, remain vigilant for signs of a potential shift in interest rates. “We are watching bankruptcy statistics, unemployment figures, or any indications of a slowing economy that could also signal that interest rates have peaked and perhaps it’s time for them to come down,” says Sissener. Until then, “the market is in waiting modus, and we expect the market to have downward pressure until we see the Fed or European central bank starting to panic about the state of the economy.”
Diverse Nordic Landscape
Sissener underscores that the Nordic region “is not really one market.” Each Nordic country is influenced by distinct fundamental drivers and factors. “Different factors drive the Norwegian market and economy compared to the Swedish market,” says Sissener. While the Swedish market may have to await an economic upturn, the Norwegian market holds particular appeal for both local and especially international investors.
“[The Nordic region] is not really one market.”
“The Norwegian Kroner has significantly devalued over the last few years for no reason at all. We have one of the strongest economies, no other country in the world has got twelve national budgets in financial assets and is debt free,” explains Sissener. “A lot of the companies are pretty cheap, not to say very cheap, but cheap.” Getting some exposure to the Nordics, especially Norway, holds solid potential, according to Sissener.
Emphasis on Cash Flow
Given the prevailing macroeconomic backdrop, Sissener Canopus has populated its long portfolio with solid, well-run, cash flow-generating companies, complemented by select micro bets on the companies of the future. “We stick with the names for a very long time, the turnover in our portfolio is mostly related to the derivatives exposure that we use to adjust our net exposure,” explains Sissener. “If you look at the turnover companies, we don’t even turn them over once every three years. And a lot of the companies we have had since inception.”
“We stick with the names for a very long time…”
Sissener’s investment philosophy centers on the belief that cash flows provide a reliable compass for investment decisions. “Our approach is highly focused on cash flow generation,” says Sissener. This principle has also influenced the asset manager’s sector exposure, resulting in increased exposure in sectors such as energy, finance, and technology. The portfolio has a dividend yield of around four and a half percent and trades at about nine times earnings. “Even at lower share prices, these stocks would continue to generate high returns for shareholders.”