After founding his own macro research firm, former Nordea Chief Strategist Andreas Steno Larsen has joined forces with fixed-income specialist Asgard Asset Management to launch a new macro hedge fund. The newly established Asgard-Steno Global Macro Fund blends Steno’s macro nowcasting techniques – designed to capture real-time shifts in the macro environment – and Asgard’s time-tested risk premia strategy.

“We’ve combined our strengths, I see this as a joint venture where we integrate the best aspects of our macro strategy with the strongest elements of Asgard’s risk premia approach,” says Steno. Steno co-manages the macro strategy alongside Chief Portfolio Manager Claus Venderby Hornsleth and Chief Technology Officer Alex Mealor, while the Asgard team oversees the risk premia strategy in interest rate markets. Since Steno’s macro strategy primarily relies on derivatives such as futures and options – which require minimal cash – idle cash is deployed into Asgard’s risk premia strategy to generate additional returns. “Asgard’s risk premia strategy operates beneath the surface, while we simultaneously take macro overlay positions using non-cash instruments,” Steno explains.

“We’ve combined our strengths, I see this as a joint venture where we integrate the best aspects of our macro strategy with the strongest elements of Asgard’s risk premia approach.”

The Power of Nowcasting

At the heart of the fund’s macro strategy is nowcasting – a process that uses high-frequency, real-time data to forecast current or imminent economic conditions. Unlike traditional forecasting methods, which rely on lagging indicators and historical trends, nowcasting provides an almost instantaneous read on economic shifts, enabling the fund to react swiftly to emerging trends.

Steno’s nowcasting model is anchored in three primary pillars: inflation, growth, and liquidity. “Our goal with the macro strategy is to stay ahead of inflation trends, growth dynamics, and liquidity conditions in major macro markets in real time,” Steno explains. The strategy allows for positioning across a broad range of asset classes, including commodities, fixed income, equities, and foreign exchange. “The only constraint we set for ourselves is liquidity,” emphasizes Steno, the strategy’s main architect.

“Our goal with the macro strategy is to stay ahead of inflation trends, growth dynamics, and liquidity conditions in major macro markets in real time.”

To stay ahead of inflation trends, the team utilizes a combination of online price data and market-based indicators. By closely tracking traded energy prices, food costs, and other consumer goods, the fund can assess inflation momentum in real time. The system they have developed over the years provides a real-time inflation snapshot of major economies, allowing them to respond swiftly to shifting dynamics.

To assess economic growth, the nowcasting model sidesteps the delays of traditional monthly or quarterly data releases. “We don’t want to rely on data that is only published monthly or quarterly—we aim to gain a time advantage over those releases,” explains Steno. The model focuses on three key indicators. “First, we track energy consumption in major economies, analyzing daily electricity and gas usage to determine whether industrial momentum is rising or falling,” says Steno. “Second, we use congestion-based measures, monitoring everything from traffic flow and metro ridership to real-time mobility data.” He continues, “The third pillar is daily observations of withheld taxes.” By diving into treasury databases, the team can see whether withheld tax revenues are rising or falling, providing an early signal of economic activity.

These real-time indicators offer a dynamic picture of economic momentum. “We are not particularly concerned with whether growth is 2 percent or 3 percent – what matters most is the trend relative to recent developments,” Steno emphasizes. “The rate of change is the most critical parameter for understanding momentum in financial markets.”

“…what matters most is the trend relative to recent developments. The rate of change is the most critical parameter for understanding momentum in financial markets.”

The third pillar, liquidity, is an area Steno has deeply focused on throughout his career, particularly during his time at Nordea. “We monitor central bank balance sheets daily to calculate the liquidity pool available for money markets, including currencies like dollars, euros, sterling, Swedish crowns, and more,” he explains. “While we don’t have real-time data, we work with end-of-day values, which we then incorporate into our nowcasting model.”

With all the data collected and analyzed, the team essentially gets a daily read on inflation, growth, and liquidity. They then use these inputs to calculate expected returns across various asset classes. “For instance, if inflation and growth are trending upwards while liquidity is declining, all three indicators would suggest a negative expected return on treasury bonds, since these are the key factors influencing the outcome,” Steno provides an example.

Allocation and Risk Management

The nowcasting model uncovers investment opportunities across various asset classes, including commodities, equities, fixed income, and foreign exchange. However, the Asgard-Steno Global Macro Fund enforces strict risk exposure limits, capping the value-at-risk (VaR) at 50 percent per asset class. “For instance, 50 percent of the value-at-risk budget can be allocated to equities or fixed income at any given time,” Steno explains the team’s approach to managing concentrated risks. “We do take on relatively clustered risk in our trend strategy because we have confidence in our nowcasting process,” he emphasizes. “We believe that by gaining a time advantage over the actual releases of inflation, growth, and other factors, we can manage the risk more effectively.”

The macro strategy is highly active, typically maintaining around seven to ten positions with an average holding period of less than a month. This quick turnover allows the fund to swiftly respond to changing market conditions, while its focus on highly liquid instruments ensures cost efficiency. The use of futures, options, and other derivatives allows the team to keep cash idle, which can be deployed elsewhere – particularly in Asgard’s risk premia strategy. The fund’s risk allocation model typically takes roughly double the risk in the macro strategy compared to the risk premia strategy.

Leveraging Asgard’s Risk Premia Approach for Enhanced Returns

“What sets this strategy apart from others in the market is how we complement it with a cash strategy in a clever way,” says Steno. “We express ourselves solely through non-cash instruments, allowing the cash pool to be used effectively in Asgard’s leveraged risk premia strategy.” Asgard Asset Management employs a leveraged risk premia strategy, primarily focused on Scandinavian fixed income markets. This approach seeks to capture risk premia –the returns earned for assuming specific market risks – by investing in high-quality assets and applying controlled leverage to enhance returns.

“The Asgard strategy provides us with a smart beta to the market and an efficient way to utilize our cash pool when it’s not being actively deployed.”

“The Asgard strategy provides us with a smart beta to the market and an efficient way to utilize our cash pool when it’s not being actively deployed,” says Steno. “This approach should help us outperform benchmarks after costs, which is, of course, our ultimate goal.” For the Asgard-Steno Global Macro Fund, the team also has the flexibility to “neutralize the beta from the risk premia strategy during times of market stress,” when risk premia fail to adequately compensate for risk. Given that Asgard’s strategy has delivered an annualized return of 12 percent since its launch in mid-2003, the combination of Steno’s macro strategy with Asgard’s risk premia approach makes for a highly compelling investment mix.