Stockholm (HedgeNordic) – Large institutional investors generally look to a three-year track record as a pre-requisite for investing in hedge funds. With Coeli Absolute European Equity approaching its fifth anniversary, Malmö-based Mikael Petersson and his team have been awarded a $250 million mandate by a sovereign wealth fund that will mirror the long/short equity fund’s concentrated long portfolio.

“In an investment career, there is no higher reward than winning such a large mandate from a reputable sovereign wealth fund.”

After more than 20 years on the buy-side as an analyst and portfolio manager at a handful of well-known asset managers such as Lansdowne Partners, Kairos and SEB in London and Stockholm, Mikael Petersson launched Coeli Absolute European Equity with about $10 million under management in January 2018 with the backing of Coeli Asset Management. Fast forward four and a half years, Petersson and his team now manage $450 million across two funds and the recently-awarded mandate.

The sovereign wealth fund first came across Petersson and his long-sculpted and time-tested investment approach during a presentation in the autumn of last year. After a series of both online and face-to-face meetings and a comprehensive due diligence process, the sovereign wealth fund awarded Petersson an initial mandate of $250 million that mirrors his hedge fund’s highest conviction positions.

“The wealth fund’s team was in the Scandi region back in March and visited our Malmö office, which I was positively surprised about,” recalls Petersson. “This face-to-face meeting allowed their team to learn more about my and my team’s experience and background, the high-profile individuals in London and other hubs that I have been working with since the end of the 1990s,” he continues. With Petersson based in the remote city of Malmö and being a less-known name to foreign investors, the sovereign wealth fund may have become more comfortable with the idea of investing with Petersson after finding out more about his previous experiences and network of high-profile names.

At the end of the day, however, it was Petersson’s approach to investing that caught the attention of the sovereign wealth fund. “The investment approach is the same as it has been for the last 23 years,” says Petersson. “We employ a fundamentally-driven approach looking for misunderstood companies offering good value, where the management is focused on creating value,” explains the portfolio manager. “I am looking to invest in misunderstood companies with significant value creation potential that are managed by people focused on creating value.”

“We employ a fundamentally-driven approach looking for misunderstood companies offering good value, where the management is focused on creating value.”

Despite a difficult first half of 2022, Coeli Absolute European Equity performed strongly during its first four years with an annualized return of 16 percent. The strong alpha generation on the long side, his prior experience at several large hedge fund managers and his strong network have collectively persuaded the sovereign wealth fund to seek exposure to Petersson’s long investment ideas. “In an investment career, there is no higher reward than winning such a large mandate from a reputable sovereign wealth fund,” says Petersson. “We are very honored to have been awarded such a mandate.”

“Since this year’s performance has been frustrating for us, it is even more rewarding to get this mandate during this period, which hopefully enables us to position the portfolio for strong returns in the future.”

The mandate will be allocated across 20 positions on average, according to Petersson. “The number will likely come down slightly over time, as we would like to have fewer high-conviction ideas,” he adds. Compared to Coeli Absolute European Equity’s portfolio, the new mandate may maintain slightly lower exposure to less-liquid, smaller-sized companies. “Since this year’s performance has been frustrating for us, it is even more rewarding to get this mandate during this period, which hopefully enables us to position the portfolio for strong returns in the future.”