Norwegians have long demonstrated a deep understanding of commodity markets, with national wealth rooted in natural resources such as oil, gas, hydropower, and seafood. This cultivated a keen awareness of global supply and demand dynamics, price cycles, and the geopolitical forces shaping commodity markets. It’s no surprise, then, that Svelland Capital – the commodity-focused asset manager behind one of the best-performing and fastest-growing Nordic hedge funds in recent years, the Svelland Global Trading Fund – traces its roots to Norway. The key to the firm’s success? A profound understanding of supply and demand dynamics.
“To understand developments in the commodity markets, the freight market, and commodity-related equities, you need to understand the underlying supply and demand dynamics and their direction,” explains Norwegian Tor Svelland, founder and CIO of Svelland Capital. The investment process behind Svelland Capital’s flagship fund “begins with an understanding of six key commodities,” namely natural gas/liquefied natural gas (LNG), crude oil, gold, copper, aluminum, and iron ore. Although the Svelland team’s primary focus lies in gaining a granular understanding of physical commodities and shipping market fundamentals, Svelland express their views through investments in single-name stocks, commodities, or a combination of both.
“To understand developments in the commodity markets, the freight market, and commodity-related equities, you need to understand the underlying supply and demand dynamics and their direction.”
Svelland explains the advantages of using stocks to implement the team’s views by offering a contrasting perspective on the widespread recession fears that have gripped markets since the so-called Liberation Week. “Everyone is taking about a recession, and that’s why oil, freight, and shipping stocks are all down,” says Svelland. While he does not expect a recession triggered by tariffs, Svelland argues that even if one were to occur, it would not justify the extent of the current sell-off. “We’re producing 104 million barrels of oil per day, and if demand falls to 103 million, that won’t meaningfully impact the global tanker fleet – the change is too small to matter,” he explains, questioning the logic behind shorting tanker stocks that are already trading at deep discounts to their net asset value.
Contrarian Stance
While systematic macro and trend-following funds have been pushing the prices of oil, freight, and shipping stocks lower, Svelland is taking a contrarian stance. “We are positioned against these players because we focus on the fundamentals,” he explains. “I believe the oil market is balanced and in good shape. Inventories are extremely low, and they will need to be replenished – especially at these lower price levels.” As for shipping, Svelland sees no rationale for being negative. “In backwardated commodities markets, I can’t short shipping stocks carrying crude oil, and I can’t short freight either – the supply-demand dynamics look fantastic, given the aging fleet and the ‘dark fleet’ that is literally shrinking day by day.”
“In backwardated commodities markets, I can’t short shipping stocks carrying crude oil, and I can’t short freight either – the supply-demand dynamics look fantastic, given the aging fleet and the ‘dark fleet’ that is literally shrinking day by day.”
Being contrarian is often less painful when investing through single-name stocks rather than derivatives, notes Svelland. “I can be wrong because the spot market moves against me, or because macro systematics and CTAs are positioned the other way,” he acknowledges. “And that’s fine – because as long as I’m right about the underlying fundamentals, I’ll either collect dividends or see the market eventually turn in our favor.” Svelland describes it as a patience game: “Sometimes it’s just about waiting. If you’re confident in the supply-demand dynamics, and you’ve built the position at attractive levels, even if it moves against you initially, it’s only a matter of time until it pays off.”
“Sometimes it’s just about waiting. If you’re confident in the supply-demand dynamics, and you’ve built the position at attractive levels, even if it moves against you initially, it’s only a matter of time until it pays off.”
However, Svelland doesn’t always see himself as a contrarian, especially regarding the common belief that increased investment in electricity generation is vital for Europe’s energy security. “Europe has been heavily dependent on natural gas from Russia, and that foundation has now been shaken,” says Svelland. He acknowledges that Europe has done an impressive job building infrastructure to import LNG but warns that the energy security on the continent remains fragile. “Battery technology will continue to improve and help stabilize the grids, but for now, we need a mix of coal, some natural gas, and renewables,” he argues. “With rising electricity demand, particularly from data centers and other sectors, it’s very attractive to own assets that can produce steady electricity for many years to come.”
Building a Resilient Platform Beyond a Single Strategy
Since its launch in 2017, the Svelland Global Trading Fund has emerged as one of the bright spots in the Nordic hedge fund industry, standing out both for its strong performance and steady asset growth, with capital inflows from high-profile institutional investors. Its success is built on making discretionary, high-conviction investments in commodities markets and related equities.
The primary objective for Svelland Global Trading Fund is to achieve an annual return target of 15 percent over time, and Svelland sees no reason to set a higher goal. “If you aim for 20 or 25 percent, you inevitably have to take on much more risk,” says Svelland. “Since many commodity hedge funds largely disappeared around 2011 to 2013, it’s crucial to build trust and establish ourselves as a reliable, long-term player in the commodity market,” he emphasizes. “That’s one of my key objectives.”
“Since many commodity hedge funds largely disappeared around 2011 to 2013, it’s crucial to build trust and establish ourselves as a reliable, long-term player in the commodity market. That’s one of my key objectives.”
To establish itself as a reliable, long-term player in the market, Svelland Capital has expanded beyond a single-strategy focus. In addition to its flagship strategy, the firm manages a futures-only strategy Svelland Commodities Futures Plus and co-manages a Certified Origin Gold Exchange Traded Certificate (ETC) in partnership with Edmond de Rothschild. Due to growing investor interest, Svelland Capital is also exploring a new strategy that would provide investors with long-only exposure to commodities, shipping, and energy transition sectors.
The rationale behind launching the futures-only strategy is rooted in addressing the needs of investors seeking to avoid equity risk. “The strategy focuses solely on futures – commodity futures, freight futures, and indexes – eliminating single-stock risks, management issues, and governance concerns,” explains Svelland. The strategy reflects the same top-down views on commodity markets as in the flagship fund. “We focus on the day-to-day analysis of supply, demand, and market trends,” says Svelland. “When we take a position in the flagship fund, we can reflect the same exposure into the futures-only strategy.” While the risk profiles of the two strategies differ, both ultimately express the same market view.
Svelland Capital also co-manages a Certified Origin Gold ETC that provides investors with exposure to physical gold stored in Edmond de Rothschild’s (EdR’s) Geneva vaults. This ETC is available in various currency denominations on the Amsterdam and Oslo stock exchanges and will expand to others, including Stockholm. The ETC provides liquidity and tangible assets through flexible redemption options, allowing investors to redeem either for cash or physical gold bars delivered to a location of their choice. In addition, the gold is ethically and sustainably sourced, fulfilling over 60 criteria.
Svelland highlights the long-term value of gold, emphasizing that “whatever happens in the world, you can’t take the gold away when independently stored.” Moreover, he explains that the main driver of higher gold prices for the last two years has been Central Bank buying. While Russia built up gold reserves ahead of its invasion of Ukraine, Turkey, BRICS members China and India, Central and Eastern European countries have been building their reserves more recently. This trend is set to continue, not least as China as an export economy holds much lower reserves compared to Germany. Svelland further notes that gold serves not only as a store of value and a safe haven during turbulent times for individuals and governments but also has tangible industrial uses: “gold is consumed into jewelry, watches, the car industry, and many other sectors. It’s used for more than just jewelry.”
Long-Term Vision for Growth
Another potential strategy that Svelland Capital could pursue is a long-only approach to commodities. “The strategy could use up to 1.3x leverage when fully invested, and when risk needs to be reduced as opportunities become less attractive, we can scale it down to about 75 percent net exposure,” explains Svelland. The strategy would focus on long positions in shipping stocks, oil producers, mining companies, and those involved in electricity production, along with energy and metals.
“The business has evolved; it’s not just one fund anymore, which is good for stability and revenue diversification.”
Looking ahead, Svelland envisions Svelland Capital expanding across multiple strategy pillars to ensure long-term stability as a commodity-focused expert. “The business has evolved; it’s not just one fund anymore, which is good for stability and revenue diversification,” says Svelland. With Svelland Capital approaching $1 billion in assets under management across all products, the majority in the flagship strategy, the firm has more room for growth.
“I currently envisage closing the flagship fund at $1.2 billion. The futures strategy could easily grow to $2-3 billion, and the gold product should target $3-5 billion,” Svelland notes. “The long-only strategy could reach an additional $1-2 billion. Moreover, commodities markets continue to expand and offer new opportunities so we may grow further. If we succeed with these initiatives, we’ll have a strong presence within our core range of commodities, with our research already strong and our company well-diversified to grow long term.”
Svelland Capital (UK) Ltd has seconded the services of certain employees of Svelland Capital (UK) Ltd to assist Mirabella Financial Services LLP (“Mirabella”) with the provision of investment management services in relation to Svelland Global Trading Master Fund. Mirabella is authorised and regulated by the UK FCA (FRN: 415559). Mirabella has not independently verified the information from other sources and Mirabella gives no assurance, express or implied, as to whether such information is accurate, true or complete. There is no relationship between the Physical Gold ETC product and Mirabella.
This article is part of HedgeNordic’s “Nordic Hedge Fund Industry Report.”
