Few investors are surprised anymore that most actively managed equity funds underperform their passive benchmarks. Yet, that doesn’t mean active management has lost its edge; it simply needs to be done differently. Former Saxo Bank colleagues Peter Garnry and Julius Justesen have identified the root causes behind traditional active funds’ chronic underperformance and set out to challenge that model with their own venture, Gesda Capital Global Equities. Their approach builds on concentration, thematic conviction, rigorous fundamental analysis, and a clear commitment to cost efficiency.
“If you look at the range of active products available to clients, there’s too much consensus hugging,” says Julius Justesen. “The premise for delivering alpha simply isn’t there. Portfolio managers are often afraid of taking risk, their portfolios have very low tracking error, and any deviation from the benchmark is viewed as negative.” To generate true alpha, Justesen argues, active managers must embrace risk through greater concentration, maintain a cost structure that doesn’t erode returns, and adopt a genuinely long-term investment horizon.
“If you look at the range of active products available to clients, there’s too much consensus hugging.”
Julius Justesen
Unlike most fundamental managers, the Gesda Capital duo starts top-down, not bottom-up. “We begin with the macro picture,” says Peter Garnry, formerly Chief Investment Strategist at Saxo Bank. “We look at where the world is moving and the long-term trends.” Once a theme is identified, the process shifts to company-level analysis. “We dig into the theme to understand which companies are involved, what their competitive advantages are, how strong their management and business models appear, and whether valuations are reasonable,” elaborates Garnry.
“We begin with the macro picture. We look at where the world is moving and the long-term trends.”
Peter Garnry
A key reason for adopting a thematic approach, Garnry notes, is to focus on companies with stable, long-term demand drivers. “We want businesses supported by predictable, structural trends,” he says. “We’re not trying to time markets or industries based on where they are in the cycle.” The duo looks for themes that offer enduring growth and visibility. These themes can take many forms, such as Europe’s defense rearmament over the coming decade, the rise of cybersecurity and artificial intelligence, or the ongoing reindustrialization of Europe. “It could also be social media or online advertising,” Garnry adds. The important thing is that the demand behind the theme is long-term and persistent.
Themes are also diversified to avoid overlap, forming the first layer of risk management. “We ensure our themes don’t overlap too much, which is the first layer of our risk management,” according to Garnry.
A Multi-Layered Risk Framework
The second layer of risk management lies in ensuring balance across business models. “A capital-intensive company with low turnover on invested capital will typically have a higher operating margin,” Garnry explains. “Meanwhile, a capital-light company will have a high turnover and lower margins. We want a good balance across this curve.” Despite the extreme concentration – typically only eight to 14 holdings – the portfolio’s exposure to different business models creates diversification across risk factors.
“We use machine learning to identify clusters within the portfolio, currently three, and allocate equal risk across them.”
Peter Garnry
The third layer comes from its allocation process, where Gesda uses machine-learning techniques to remove emotional bias. “We use machine learning to identify clusters within the portfolio, currently three, and allocate equal risk across them,” says Garnry. “Within each cluster, an algorithm tilts weights toward characteristics we like,” he elaborates. “It’s an unemotional way of allocating risk. The human input lies in the business analysis and outlook, but risk allocation itself is systematic.”
Long-Term Core, Opportunistic Edge
The team at Gesda Capital invests with a distinctly long-term mindset, allocating around 90 percent of its capital to what they call core positions. “Our aim is to find 1-2 new core ideas per year,” says Justesen.
The remaining 10 percent is reserved for more opportunistic special situations. “These are cases where the underlying business continues to perform well, but investors have temporarily lost confidence in the stock,” explains Justesen. “The fundamentals don’t justify the sell-off, and that creates opportunity.” An example could be Novo Nordisk’s recent share price correction, which the team views as a potential special-situation opportunity.
“Our core positions typically have a holding period of five to ten years, while special situations are more short-term, usually one to two years.”
Julius Justesen
The holding period also varies depending on whether a position falls within the core or special-situations bucket. “Our core positions typically have a holding period of five to ten years, while special situations are more short-term, usually one to two years.”
Redefining Active Fees
Lower fees are also a central part of Gesda Capital’s philosophy. The management fee is set at 95 basis points, and the founders plan to reduce it as the strategy scales. “Through economies of scale, any savings we achieve will be passed on to investors,” says Justesen. They aim to gradually reduce the management fee from 95 to 85 basis points or even lower at the right level of assets under management. “The fee difference between passive and effective active strategies shouldn’t be large. We see this trend globally and want to stay ahead of the curve.”
Gesda Capital’s founders believe active management can deliver alpha if done differently. With a concentrated, thematic approach, multi-layered risk management, and a long-term mindset, Gesda Capital Global Equities positions itself as a modern answer to an age-old challenge: how to outperform in an increasingly efficient market.
