Stockholm (HedgeNordic) – Launched in mid-2023, Joakim Hannisdahl’s shipping-focused long/short equity fund enjoyed an impressive 12 consecutive months of positive performance, driven by its agile and light-footed strategy. After reaching an all-time high in mid-July, a broad sell-off in markets in the latter part of the month ended Gersemi Shipping Fund’s winning streak. The sell-off intensified and carried into early August, but Hannisdahl took advantage of the situation by deploying the fund’s available cash to capitalize on the lower valuations – a move that has already begun to bear fruits.

“The fund reached a new all-time-high mid-July, but the broad sell-down in equities towards the latter part of the month also impacted shipping equities,” notes Hannisdahl, who saw his fund gain 19.4 percent in its first half-year of operations in 2023, with an additional year-to-date gain of 11.7 percent through the end of July. While shipping equities generally exhibit little correlation with broader equity indices, “the correlation increases during broad equity sell-offs, one reason being that investors are indiscriminately seeking liquidity,” according to Hannisdahl. The Gersemi team responded to the downturn by investing the fund’s cash holdings, which can sometimes exceed 40 percent of the portfolio.

“The fund reached a new all-time-high mid-July, but the broad sell-down in equities towards the latter part of the month also impacted shipping equities.”

“We entered the broad equity sell-off with a 54 percent net exposure (82 percent gross),” Hannisdahl explains. “With our fundamental views across the various shipping segments more or less unchanged over the past months, we used the lower equity pricing to increase our net and gross exposure during late July, ending the month at 61 percent net and 87 percent gross,” he elaborates. As the sell-off extended into early August, Hannisdahl deployed the last of the fund’s available cash at the market open on August 5. Gersemi Shipping Fund had 13 percent of its portfolio available in cash at the end of July.

“Although the fund is still down for the month so far in August, our increased net exposure amidst rising equity pricing in recent days has led us to recoup a large portion of the drawdown month-to-date.”

This timely deployment is already bearing fruit as markets recover. “Although the fund is still down for the month so far in August, our increased net exposure amidst rising equity pricing in recent days has led us to recoup a large portion of the drawdown month-to-date,” says Hannisdahl. Gersemi Shipping Fund posted a gain of 2.7 percent for the week ending August 16, trimming the month-to-date decline to 2.8 percent. Despite the recent volatility, the fund is still up 8.5 percent for the year.

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One of the standout contributors to the fund’s recent performance was a successful short position in Avance Gas Holdings, an owner and operator of Very Large Gas Carriers or VLGCs. Following BW LPG’s announcement of a $1.05 billion deal to purchase Avance Gas’ fleet of 12 VLGCs, the share price of Avance Gas jumped 11 percent to NOK 191. The Gersemi team quickly recognized that the transaction transformed Avance into a cash-rich business with four newbuild medium gas carriers (MGC), making a net asset valuation approach more relevant. Based on this analysis, the team estimated the company’s fair value at NOK 151 per share.

“We covered part of our short intraday at a NOK 155 average, before closing the remainder of the position today at a NOK 157 average, contributing a 57bps realized gain for the fund in isolation.”

“We shorted AGAS aggressively and were able to build a substantial position at a NOK 178 average due to the elevated liquidity in the share and by finding blocks via our brokers,” Hannisdahl recounts. The share price gradually fell to around NOK 155 as the market began to digest the deal’s implications. “We covered part of our short intraday at a NOK 155 average, before closing the remainder of the position today at a NOK 157 average, contributing a 57bps realized gain for the fund in isolation.”