Stockholm (HedgeNordic) – A superficial glance at the monthly development of major stock indices in July might suggest a quiet month, with OMX 30 Stockholm up 1.6 percent, S&P 500 up 1.2 percent, and the tech-heavy Nasdaq 100 down 1.6 percent. However, “that’s far from the truth,” assert Jens Olsson and Robin Thörn, the managers behind the absolute return fund SilverDome One.
“On the surface, it may seem like not much has happened,” says Jens Olsson, co-portfolio manager of the multi-asset, multi-strategy fund for investors with a high aversion to risk. “July offered an extreme rotation between the stock markets, we saw periods of a ‘dash for cash,’ where basically all financial assets fell simultaneously,” he adds, also mentioning that AI-favorite NVIDIA lost a full 23 percent from its peak. From July 9 to July 30, US small-cap companies, as reflected by the Russell 2000, rose significantly by 10.6 percent, while the Nasdaq 100 fell by 8.1 percent. “This is a rarely seen rotation,” notes Olsson.
“On the surface, it may seem like not much has happened, but that’s far from the truth.”
The SilverDome team had previously cautioned about such a scenario in earlier updates. “Narrow markets, where investors primarily buy a few stocks such as large US technology companies, imply a significant concentration risk in many portfolios,” explains Thörn. “A high valuation, as we have seen in NVIDIA, for example, does not necessarily mean that a stock or an asset class will fall, but it increases the risk of it,” he argues. “Successful investing is often about identifying where the probability of a successful outcome is greatest, where you have a tailwind instead of a headwind.”
“July 2024 was a reminder that intelligent diversification, where concentration risk is avoided, together with an opportunistic and selective Alpha program, has good prospects of generating a stable return even during large rotations in the global financial markets.”
Up 1.9 percent in July and 9.1 percent year-to-date, SilverDome One managed to navigate the large swings during the month of July by embracing a diversified investment approach across various asset classes, strategies, countries, and sectors. As Olsson previously told HedgeNordic, “We put together a set of strategies to create a portfolio that is balanced to cope with different market environments.” Reflecting on the fund’s approach and July performance, Olsson notes that July “was a reminder that intelligent diversification, where concentration risk is avoided, together with an opportunistic and selective Alpha program, has good prospects of generating a stable return even during large rotations in the global financial markets.”
