Stockholm (HedgeNordic) – There is significant heterogeneity in the universe of multi-asset investment solutions. Despite an extensive variety of approaches, Nils Brobacke still saw more room for innovation and distinctiveness in the Nordic multi-asset space. He launched a multi-asset global macro fund – Brobacke Global Allokering – under the umbrella of Alfakraft Fonder in mid-November 2022 with the aim to deliver stable returns in both bull and bear markets.

Having tested his global macro strategy through an actively managed certificate (AMC) on the Luxembourg Stock Exchange since mid-2021, Brobacke launched the strategy in a fund set-up in collaboration with Alfakraft Fonder. “I used to manage a quant hedge fund trading currencies at Alfakraft Fonder between 2011 and 2015,” Brobacke comments on the decision to launch his fund under the umbrella of Alfakraft. Following five years as a chief market analyst for CMC Markets in Sweden, Brobacke has broadened his investment universe and expertise to include asset classes such as bonds, equities, and commodities.

“There is a lot of influence in my approach from the trend-following CTA space.”

After running a pure FX-focused hedge fund in the early 2010s, he has re-joined the hedge fund universe with a flexible multi-asset global macro strategy that caters to both professional and retail investors. Brobacke’s global macro strategy focuses on anticipating price movements in equity, currency, bond, and commodity markets based on market-related information such as price data, sentiment analysis, and capital flows. “There is a lot of influence in my approach from the trend-following CTA space,” says Brobacke. After experiencing both the upsides and downsides of being fully automated, Brobacke has opted for a more discretionary-oriented approach to investing.

The portfolio construction rests on three main pillars, with each focusing on different time horizons: longer-term multi-asset allocation, shorter-term FX trading, and intra-day derivatives trading using equity futures.

Primary Source of Returns: Multi-Asset Allocation

Brobacke Global Allokering has maintained about 80 percent of its portfolio equally allocated to equities, bonds, and commodities since launching in mid-November 2022. “The exposure to each asset class can change at any moment, but so far the allocation has been relatively equal between stocks, bonds, and commodities,” says Brobacke. The intra-asset exposure, however, has evolved over time. “I don’t buy single bonds or single stocks, but the fund is typically exposed to different segments or corners of bond and equity markets using ETFs or different commodities,” according to Brobacke.

“If I like banks, I can own the STOXX Europe 600 Banks ETF that gives exposure to European banks,” explains Brobacke. “If I like global high-yield bonds or emerging market bonds, I buy broad-based ETFs offering exposure to these assets,” he elaborates. “The allocation to commodities is also flexible.” The mandate allows Brobacke to maintain both positive and negative exposure to any of these asset classes. “My mandate is broad. I don’t have a bias toward any direction as I seek to make money in all market environments. At the moment, I am positive on stocks, bonds, and commodities.”

“My mandate is broad. I don’t have a bias toward any direction as I seek to make money in all market environments.”

“The allocation has been pretty equal between stocks, bonds, and commodities, but it has changed between the sectors,” Brobacke discusses how the fund’s exposure has changed since inception. “I started off with a lot of tilt to value, banks, healthcare, and defensive sectors in the equity space. I then started to build more tech exposure.” On the commodities side, he went from having a lot of exposure to “brown” commodities such as oil and coal at the beginning of the year to metals such as gold, silver, and copper. “In terms of bonds, I owned more treasury bonds at the beginning of the year, but I changed the exposure to more corporate bonds and high-yield bonds, and low-duration Euro bonds. The exposure has been pretty static between the three asset classes, but quite active between the sectors in the different asset classes.”

FX and Derivatives Buckets

The multi-asset allocation bucket serves as the primary return driver for Brobacke Global Allokering. “The main bulk of the PNL should be generated from the multi-asset allocation book,” says Brobacke. The investment horizon within this bucket can span from weeks to months. “In FX trading, the horizon is a bit shorter due to more active management, with the investment horizon spanning from days to weeks,” according to Brobacke. It is important to pick the right assets in the portfolio, argues Brobacke, but “it is also very important to consider how you express that asset allocation decision in terms of FX exposure.” He has made gains by betting on the Swedish krona depreciating against the sterling, euro, and U.S. dollar.

“The derivatives side is mostly a way to handle intra-day risk and big volatile swings as a result of central bank decision announcements or other macro events.”

The derivatives bucket, meanwhile, involves an intra-day hedging strategy against the multi-asset allocation bucket. “The derivatives side is mostly a way to handle intra-day risk and big volatile swings as a result of central bank decision announcements or other macro events,” explains Brobacke. “Risk management is a key component of the investment process. The high liquidity in commodities, currencies, bond and equity ETFs allows me to manage risk effectively, which is very suitable for a global macro strategy,” he elaborates.

Brobacke’s global macro strategy seeks to achieve diversification through the flexibility to bet on market directions, as well as the ability to trade across different asset classes, and time horizons. Brobacke Global Allokering aims to deliver annual returns above ten percent, with volatility under ten percent and a maximum drawdown of five percent. “I don’t have to be right all the time or even half of the time. I look to generate stable returns by finding big winners and booking small losses.”