Stockholm (HedgeNordic) – Danske Bank Asset Management notes that some of its hedge funds are approaching capacity limits, reflecting strong performance-driven growth in assets under management throughout 2023 and the first quarter of 2024. With a combined €2.6 billion in assets under management, its suite of three fixed-income hedge funds has less room to accommodate additional capital at this stage.
“Our hedge funds are doing so well that we are now approaching what you could call capacity limits,” Christian Heiberg, Head of Danske Bank Asset Management, tells AMWatch following the release of the asset manager’s first-quarter report. “We are currently discussing how much money we are prepared to accept, especially when it comes to the old, traditional hedge funds, which are performing very, very well,” he continues.
“Our hedge funds are doing so well that we are now approaching what you could call capacity limits.”
Christian Heiberg, Head of Danske Bank Asset Management
Heiberg underscores the importance of striking a balance between asset growth and maintaining performance levels, warning of the potential negative impact of capacity-exceeding asset levels on long-term returns. “We want to be able to continue to present the same good returns as before, but because the strategies operate in markets that are quite illiquid, we risk them reaching a size where it can be difficult to move in the market.”
The oldest and largest hedge fund, Danske Invest Hedge Fixed Income Strategies, focuses on exploiting relative and absolute mis-valuations predominantly in Scandinavian fixed-income markets. Danske Invest Fixed Income Relative Value, on the other hand, represents a carve-out of the flagship strategy, tailored specifically for Swedish investors. The younger sibling, Danske Invest Fixed Income Global Value, takes a more global-focused approach under the management of Anders Møller Lumholtz. Collectively, these funds oversee €2.6 billion in assets under management as of the end of April, with Danske Invest Hedge Fixed Income Strategies leading the way at just over €1.2 billion, followed by the more globally-focused fund managing €928 million.
“We want to be able to continue to present the same good returns as before, but because the strategies operate in markets that are quite illiquid, we risk them reaching a size where it can be difficult to move in the market.”
Christian Heiberg, Head of Danske Bank Asset Management
After experiencing high single-digit or low-teen losses in 2022 due to several factors, mostly stemming from the unexpectedly aggressive interest-rate hiking cycle, all three fixed-income hedge funds swiftly recovered from the 2022 drawdowns, achieving gains exceeding 20 percent in 2023. The trio continued their strong performance into 2024, with all three funds posting high single-digit returns in the first four months of 2024. All three funds have been nominated in the “Best Nordic Fixed-Income Hedge Fund” category at this year’s Nordic Hedge Award, with Danske Invest Fixed Income Global Value winning the title of the best Nordic fixed-income hedge fund of 2023, followed by Danske Invest Fixed Income Relative Value in second place.
Among the other hedge funds under Danske Bank Asset Management, Danske Invest Global Cross Asset Volatility manages €435 million, while Danske Invest Global Alternative Opportunities oversees €379 million. Danske Invest Global Cross Asset Volatility, a multi-asset, multi-strategy fund employing volatility-related strategies, achieved its best annual performance in 2023 since launching in mid-2018 with a return of 10.3 percent after edging down 0.7 percent in 2022. Danske Invest Global Alternative Opportunities, which seeks to capture true alternative risk premia across several asset classes, has also shown promising performance since launching in August 2022, gaining 3.3 percent through the end of 2022, 6.6 percent in 2023 and an additional 1.2 percent in the first four months of 2024.
