Stockholm (HedgeNordic) – Gersemi Shipping Fund has emerged as a notable recent addition to the Nordic hedge fund industry. However, the founder and manager of this fund is no newcomer to the industry. With years of experience in equity research and several more years of investing in shipping equities under his belt, Joakim Hannisdahl brings a seasoned and proven approach to steering the shipping-focused long/short equity fund. This wealth of experience and proven approach have translated into a strong start for Gersemi Shipping Fund since its mid-2023 launch, delivering a cumulative return of 26 percent and eight consecutive months of positive performance.

“The journey has been going very well, the progress has exceeded our expectations both in terms of asset accumulation and returns,” Hannisdahl reflects on the journey of Gersemi Shipping Fund. Having employed a similar strategy before launching the fund under his asset management firm, Gersemi Asset Management, Hannisdahl notes, “The strategy has delivered a compound annual growth rate of approximately 33 percent since its inception in 2017.” While pleased with the fund’s performance and aiming to maintain similar results in the future, he cautions investors against expecting the same level of returns in the future, adhering to the timeless adage that past performance does not guarantee future results.

“The journey has been going very well, the progress has exceeded our expectations both in terms of asset accumulation and returns.”

However, Hannisdahl emphasizes that investors can expect diversification benefits from investing in Gersemi Shipping Fund and the shipping sector overall. “Both the fund and the shipping sector present interesting opportunities from a portfolio management standpoint, as their correlation with the broader market is statistically insignificant,” notes Hannisdahl, who runs Gersemi Shipping Fund alongside freshly hired portfolio manager Fredrik Flem. “Furthermore, we have not observed significant correlations with other asset classes or sectors such as oil, gold, and others.”

“Both the fund and the shipping sector present interesting opportunities from a portfolio management standpoint, as their correlation with the broader market is statistically insignificant.”

Hannisdahl’s investment approach involves quantifying and capturing the cyclical expansions and contractions in different shipping segments, which include dry bulk, oil tankers, car carriers, LPG carriers, LNG carriers, and containers. One source contributing to the limited correlation in Hannisdahl’s strategy with the broader market is the absence of correlation between these different sub-segments. “We see the same dynamics within the shipping universe itself, where we focus on six distinct segments, each showing no correlation with the others,” explains Hannisdahl. “This allows us to maximize returns while minimizing portfolio volatility.”

Niche Focus and Capped AUM

Given the specialized focus of Gersemi’s predominantly equity-driven strategy, Hannisdahl also contends with a relatively restricted pool of investable stocks. “We require sufficient liquidity to execute a light-footed strategy, thus we place a premium on liquidity,” explains Hannisdahl. “Our goal is to be able to liquidate 90 percent of our positions within five to ten business days.” He also insists on basic corporate governance standards from potential investments, which leads to the exclusion of many companies. The total universe of companies across the six targeted sectors amounts to fewer than 50 stocks. Nonetheless, backtests on liquidity instill confidence in his ability to manage a fund with assets under management of up to $200 million.

“We require sufficient liquidity to execute a light-footed strategy, thus we place a premium on liquidity.”

Hannisdahl emphasizes that he will never compromise potential returns in favor of managing a larger pool of assets. “We are not here to manage a large fund and earn fixed fees,” notes Hannisdahl, who is the second largest investor in the fund. “The fund is established for the investors, by the investors, and we are in this together,” says Hannisdahl. “If, for any reason, the returns are not as expected during a year, we are not here to earn a lot of money ourselves.”

Quantifying the Cyclicality of Shipping Sectors

The shipping industry has long been characterized by its cyclical and volatile nature, with each sub-segment experiencing its own independent cycles. “Shipping is very volatile, which underscores the need for a light-footed strategy,” notes Hannisdahl. For that reason, “the backbone of the strategy relies on the historical ability to forecast the cyclicality of shipping sectors using econometrics,” explains the former shipping analyst turned fund manager. “I have been quite successful forecasting the cyclicality of shipping sectors in the past, and I expect that to be quite successful going forward as well.”

“I have been quite successful forecasting the cyclicality of shipping sectors in the past, and I expect that to be quite successful going forward as well.”

Despite his extensive experience in the shipping industry, Hannisdahl has been taken aback by the recent surge in market volatility prompted by events such as Russia’s invasion of Ukraine, a drought leading to decreased water levels in the Panama Canal, and attacks on vessels in the Red Sea. “The past few months have been quite eventful. It’s been unusually hectic at the office, with much higher turnover than usual,” Hannisdahl remarks. Despite the volatility, Gersemi Shipping Fund has consistently delivered returns every single month since its inception. “We have been very successful at being agile thanks to our light-footed strategy, moving around the market quite fast, going from short to neutral to long positions and back to short positions again.”

Hannisdahl’s successful trading does not hinge on his ability to predict the ebbs and flows of conflicts, such as those in the Red Sea, which disrupted traffic through the Suez Canal – the shortest maritime route between Asia and Europe. “We’re not in a position to forecast the specifics of such conflicts, but we are in a position to know the implications for shipping in the Red Sea,” notes the portfolio manager. “We track every vessel daily, enabling us to anticipate potential implications that we soon see in our data,” he elaborates. “Thus, the Red Sea situation has been, for us, an exercise in risk management.” This preparedness was also evident during Russia’s full-scale war in Ukraine in early 2022, for which Hannisdahl had already devised a strategy to position his portfolio.

Light-Footed Strategy

As an illustration of the team’s light-footed strategy to navigate the volatile shipping market, Gersemi Shipping Fund, for instance, entered the month of March with about 43 percent in cash and exposure limited to just two of the six shipping sub-sectors. “In our strategy, it is very important to not allocate capital for the sake of allocation,” says Hannisdahl. Given the volatility of the shipping sector, it is imperative to identify clear investment opportunities before deploying capital. “While there are occasions when we have clear opportunities across all six segments and may need to optimize allocations, sometimes we are lacking clear investment opportunities to allocate our capital.”

“While there are occasions when we have clear opportunities across all six segments and may need to optimize allocations, sometimes we are lacking clear investment opportunities to allocate our capital.”

Since the fund’s inception in mid-2023, Hannisdahl has found dry bulk to be interesting at different times, oil tankers have remained consistently enticing during the entire duration, and LNG carriers have periodically cycled in and out of Gersemi Shipping Fund’s portfolio. Hannisdahl emphasizes the importance of not being fully invested at all times. “From our experience, within just one year, the shipping sector is so volatile that you often get a lot of unexpected investment opportunities,” he explains. “Maintaining available cash at hand allows us to seize these opportunities as they arise, often resulting in lucrative returns.”

This article is part of HedgeNordic’s Nordic Hedge Fund Industry Report.