Stockholm (HedgeNordic) – Despite showing improved performance, the fixed-income hedge fund trio at Nykredit Asset Management is struggling to reverse a downward trend in assets under management. The combined assets for the funds’ main share classes tracked by HedgeNordic dropped from DKK 4.9 billion at the end of 2018 to DKK 2.2 billion at the end of 2022, and further to DKK 1.5 billion by the end of May this year. However, the three hedge funds still manage a combined DKK 2.1 billion across all share classes.

Ralf Magnussen, the CEO of Nykredit Asset Management, attributes the declining client interest to market fluctuations resulting from interest rate hikes and wider credit spreads.  “This is partly due to the fact that hedge funds have experienced losses, for example in connection with rate hikes and credit spreads widening in 2022,” Magnussen tells AMWatch. “Some of these factors mean that it will probably take a little while before the clients return.”

“This is partly due to the fact that hedge funds have experienced losses, for example in connection with rate hikes and credit spreads widening in 2022. Some of these factors mean that it will probably take a little while before the clients return.”

Ralf Magnussen, CEO of Nykredit Asset Management.

Nykredit MIRA, one of Nykredit’s three fixed-income hedge funds, has experienced a significant decline in assets under management in the main share class, dropping from DKK 2.6 billion in late 2018 to about DKK 900 million in late 2022 and further to DKK 578 million by the end of May 2024. This decline was likely triggered by a series of losses: 15.6 percent in 2019, 5.1 percent in 2020, and another 14.8 percent in the challenging market conditions of 2022. However, the fund rebounded with a 10.6 percent gain in 2023 and an additional 7.3 percent increase in the first five months of 2024. The MIRA strategy now manages about DKK 782 million in assets across all share classes.

Nykredit KOBRA has experienced a milder decline in assets under management for its main share class tracked by HedgeNordic. Assets decreased from DKK 1.9 billion at the end of 2018 to DKK 977 million at the end of 2022 and DKK 766 million by the end of May 2023. KOBRA has performed better than MIRA in recent years, with only a minor decline of 2.6 percent in 2022. Over the past 60 months, KOBRA has delivered an annualized return of 3.1 percent, reflecting an 11.5 percent increase in 2023 and an additional 9.7 percent rise in the first five months of 2024. In contrast, MIRA recorded an annualized loss of 1.2 percent. KOBRA continues to manage DKK 1.14 billion in assets at a master account level.

The younger fund, EVIRA, has outperformed its sister funds in the past five years, delivering an annualized return of 8.4 percent over the last 60 months. After a decline of 15.4 percent in 2022, EVIRA advanced 16.8 percent in 2023 and an additional 11.8 percent in the first five months of 2024. However, its assets under management decreased from DKK 422 million at the end of 2018 to DKK 348 million at the end of 2022, and further to DKK 168 million by the end of May 2024.

“Our hedge funds did very well both in 2023 and at the beginning of 2024, so we can only be satisfied in terms of performance.”

Ralf Magnussen, CEO of Nykredit Asset Management.

“Our hedge funds did very well both in 2023 and at the beginning of 2024, so we can only be satisfied in terms of performance,” Magnussen tells AMWatch. “But we have to say that if we look at net sales, other strategies have been more successful at attracting inflows in recent years,” he acknowledges. The asset manager’s other alternative asset classes, such as private equity and infrastructure, have experienced strong demand. “In general, we have some strong products on our shelves that have a track record that allows us to retain existing customers and also attract new customers,” Magnussen tells AMWatch. “You could also say that even though the investment opportunity for hedge funds has been good and the performance has been good, there are other products that customers have preferred to invest in.”