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Hedge Fund Performance in February Reflects Market Volatility

February proved to be a turbulent month for hedge funds, as shifting trade and tariff policies introduced heightened volatility across financial markets. Equity markets, particularly in the growth and technology sectors, suffered significant declines, leading to mixed performance across hedge fund strategies. The HFRI Fund Weighted Composite Index® (FWC) dipped by 0.47 percent, with gains in Relative Value Arbitrage and Event-Driven strategies being counterbalanced by losses in Macro and Equity Hedge strategies. These figures were released in a recent report by HFR®, a global authority on hedge fund indexation, analysis, and research.

One of the sharpest declines came from cryptocurrency-focused hedge funds, as the HFR Cryptocurrency Index dropped 16.8 percent. The sharp reversal reflected the increasing volatility in digital assets, particularly Bitcoin and other major cryptocurrencies. However, some hedge fund strategies navigated the uncertainty successfully. The HFRI Multi-Manager/Pod Shop Index gained 0.92 percent, demonstrating resilience in adapting to shifting market dynamics.

The performance dispersion among hedge funds widened in February, underscoring the market’s instability. The top decile of the HFRI FWC constituents achieved an average gain of 6.5 percent, while the bottom decile declined by 8.3 percent. This 14.8 percent spread marked a notable increase from the 12.1 percent dispersion recorded in January. Over the trailing 12 months, the disparity between the top and bottom deciles was even more pronounced, with the top group gaining 31.2 percent and the bottom group declining by 15.7 percent.

Fixed-income-based Relative Value Arbitrage strategies continued to demonstrate consistency, with the HFRI Relative Value (Total) Index advancing 0.8 percent in February, marking its 16th consecutive monthly gain. Interest rate-sensitive strategies benefited from a sharp decline in interest rates as risk-off sentiment dominated. The strongest performance within this category came from the HFRI RV: FI-Convertible Arbitrage Index, which surged by 3.4 percent, followed by the HFRI RV: Volatility Index, which added 1.1 percent.

Event-Driven strategies also saw gains, despite market uncertainty. The HFRI Event-Driven (Total) Index rose by 0.3 percent for the month, driven by deep-value equity exposures and merger arbitrage opportunities. The HFRI ED: Multi-Strategy Index led the charge with a 1.4 percent gain, while the HFRI ED: Credit Arbitrage Index advanced by 1.0 percent.

Equity Hedge funds, which invest long and short across various sectors, experienced losses due to the steep declines in technology equities. The HFRI Equity Hedge (Total) Index fell by 0.66 percent, weighed down by a 3.9 percent drop in the HFRI EH: Technology Index. However, certain sub-strategies managed to generate positive returns, such as the HFRI EH: Multi-Strategy Index, which gained 3.1 percent, and the HFRI EH: Equity Market Neutral Index, which added 0.3 percent.

Macro strategies struggled in February, with the HFRI Macro (Total) Index falling 1.5 percent. Systematic strategies, in particular, were hit hard, as the HFRI Macro: Systematic Diversified Index declined by 2.8 percent, and the HFRI Macro: Commodity Index fell by 2.4 percent. Nonetheless, some managers found opportunities amid the volatility, as reflected in the 2.0 percent gain of the HFRI Macro: Active Trading Index.

Despite the challenges faced by some hedge funds, Liquid Alternative UCITS strategies managed to post gains. The HFRX Equal Weighted Index climbed 0.36 percent, while the HFRX Global Hedge Fund Index added 0.28 percent. The best-performing strategy within this category was the HFRX Relative Value Arbitrage Index, which gained 0.75 percent.

Kenneth J. Heinz, President of HFR, noted that hedge funds navigated February’s volatile environment by capitalizing on opportunities in Relative Value Arbitrage and Event-Driven strategies. He emphasized the importance of tactical flexibility in responding to rapid market shifts, particularly in the face of ongoing policy changes and economic uncertainty. As institutions and investors continue to seek both opportunistic gains and defensive capital preservation, funds that have successfully adapted to market volatility may remain attractive investment vehicles in the months ahead.

Pic (c) ARENA-Creative—shutterstock.com

NBIM Eyes Interest in Long/Short Equity

Investor interest in long/short equity strategies appears to be making a comeback as market volatility and stock dispersion – driven in part by higher interest rates – create fresh opportunities for active managers. According to MandateWire of the Financial Times, Norway’s sovereign wealth fund made its first external allocation to a long/short strategy in January and is now exploring additional mandates for other long/short equity managers.

Norges Bank Investment Management (NBIM), which oversees Norway’s sovereign wealth fund managing the country’s oil and gas revenues, currently allocates approximately $90 billion to external fund managers. While NBIM works with 110 external managers running long-only strategies, it hopes that new long/short equity mandates will generate returns exceeding the current external managers’ long-term average of 1.8 percent above the benchmark per year after fees. NBIM already manages long/short equity strategies in-house.

“We are currently evaluating long/short strategies in Europe and the US,” Erik Hilde, Global Head of External Strategies at NBIM, told MandateWire. According to NBIM’s public invitation to tender, the fund plans to award mandates across long only, alpha extension, long/short, and market-neutral strategies for listed equity markets, with initial funding for each mandate ranging from $150 million to $500 million. The focus areas include locally based managers in emerging markets running single-country products, emerging managers in both emerging and select developed markets, and sector-specific strategies. Specifically, NBIM is looking to allocate mandates to single-country long/short equity strategies in Australia and Japan, regional long/short strategies focused on Europe, and both single-sector and multi-sector long/short equity strategies.

“We are currently evaluating long/short strategies in Europe and the US.”Erik Hilde, Global Head of External Strategies at NBIM.

NBIM’s move comes amid rising concerns among investors over stretched equity market valuations, particularly in the United States, and growing skepticism about whether long-only equity exposure can continue to deliver the strong returns seen in recent years. The mandates will be managed through Separately Managed Accounts, with Hilde noting that managers will take short positions by borrowing stocks from NBIM’s extensive index portfolio to sell in the market. Managers would short stocks “exposed to high valuations, fraud, and unsustainable business models,” he added.

According to MandateWire, NBIM has yet to determine the number of mandates it will award, as this will depend on the quality of the managers who apply. NBIM is focusing on smaller, privately managed firms, as they “more often have a higher excess return than larger ones because of a better alignment of interest, a compensation structure strengthening this alignment, and being better at attracting, retaining and growing talent.” The investment process begins with submitting a request for investment (RFI), followed by on-site meetings with promising managers, questionnaires, and additional operational and compliance due diligence.

NBIM’s focus on long/short equity strategies signals a broader trend among institutional investors looking to diversify their equity exposure and capitalize on increased market dispersion to enhance returns. With rising concerns over stretched valuations and increased market dispersion, the appeal of equity long/short strategies appears to be growing. As NBIM evaluates new mandates, its shift could lead to greater capital flow into long/short equity strategies, already the largest strategy c

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Länsförsäkringar Taps Cecilia Kellner to Lead Asset Management

Swedish insurance company Länsförsäkringar has announced the appointment of Cecilia Kellner as its new Head of Asset Management, effective June 1. She joins from a similar role as Chief Investment Officer at Nordea Life and Pension. Kellner will succeed Göran Laurén, who is retiring from his position as Head of Asset Management after 13 years at Länsförsäkringar.

This role oversees the management of all assets within Länsförsäkringar AB, including those in its non-life and life-assurance companies. “It is with great pleasure that I welcome Cecilia to the important role of Head of Länsförsäkringar AB’s joint asset management,” says Jakob Carlsson, CEO of Länsförsäkringar, in a statement on the recruitment. “Cecilia brings solid experience in both asset management and leadership. I look forward to working with her and that we can continue to develop our successful asset management.”

“Cecilia brings solid experience in both asset management and leadership. I look forward to working with her and that we can continue to develop our successful asset management.”Jakob Carlsson, CEO of Länsförsäkringar. 

Kellner, for her part, shares: “I am very much looking forward to becoming part of Länsförsäkringar and continuing to build on a successful management.” Most recently, Kellner has been serving as Chief Investment Officer at Nordea Life and Pension, having initially joined the company in the summer of 2016 as an investment manager and sustainability strategist. In this role, she is responsible for overseeing SEK 300 billion in pension assets, managing a diverse portfolio across multiple asset classes, including equities, fixed income, private equity, venture capital, real estate, and private debt. Kellner’s extensive career also includes senior roles such as Senior Portfolio Manager at Strand Kapitalförvaltning, Senior Equity Research Analyst at Carnegie Investment Bank, and Senior Credit Analyst at BNP Paribas, among others.

Kellner will succeed Göran Laurén, who is retiring after 13 years at Länsförsäkringar, more than half of which were spent as Head of Asset Management. “At the same time, I would like to express a big thank you to Göran, for fine efforts that were of great importance to Länsförsäkringar’s customers,” says Länsförsäkringar’s 

Velliv Axes Alternatives Team Amid Strategic Overhaul

As part of its shift from active management to passive strategies, Danish pension provider Velliv has announced the dismissal of 18 employees from its investment and IT departments, including the entire Alternatives team. Head of Alternatives Christoph Junge confirmed that the entire team was made redundant as part of Velliv’s broader strategic realignment towards passive strategies, despite the strong performance of alternative investments for the firm.

“After seven incredible years at Velliv, my time as Head of Alternatives has come to an end due to a strategic shift that significantly reduced the role of alternative investments, despite their strong performance,” announces Junge. “As a result, the entire Alternatives team was made redundant today. While this is surprising and never easy to see talented colleagues affected, I remain optimistic about the future and the opportunities ahead.”

“After seven incredible years at Velliv, my time as Head of Alternatives has come to an end due to a strategic shift that significantly reduced the role of alternative investments, despite their strong performance.”Christoph Junge

Velliv’s Alternatives team also included Head of Credit Michael Røhling Pedersen, Senior Portfolio Manager for Credit Investments Thomas Walther Jørgensen, Senior Portfolio Manager for Real Assets Tobias Hasforth Elf-Pedersen, and Senior Portfolio Manager for Private Equity Snorre Kofoed-Hansen.

Approximately ten percent of Velliv’s €45 billion investment portfolio in mid-2024 was allocated to alternative investments, including private equity, private credit, liquid alternatives such as trend-following CTAs and commodities, as well as infrastructure and timberland. Led by Christoph Junge, Velliv’s alternatives team managed about €4.5 billion in alternative asset classes, excluding real estate, which was handled by a different team.

Velliv’s entire Alternatives team, along with other members of the broader investment team, are now seeking new opportunities. Christoph Junge, who led Velliv’s Alternatives division for the past five years, is also exploring similar roles in Denmark or internationally. “With over two decades of experience in the financial sector across Germany and Denmark, covering private banking, strategic asset allocation, manager selection, and investment leadership, I look forward to leveraging my skills in a new role,” says Junge.

Exploring the World of Exotic Alternative Investments

When people think of investments, they typically envision stocks, bonds, and real estate. However, a fascinating world of alternative investments exists beyond these traditional assets. From rare collectibles to futuristic ventures, these unconventional opportunities offer ways to diversify portfolios while potentially capitalizing on niche markets.

For those with a taste for the tangible, collectibles and fine art present intriguing prospects. Rare whisky and wine, for example, can appreciate significantly over time, with some bottles fetching record-breaking prices at auction. Similarly, classic cars such as vintage Ferraris and Porsches, have come to be not just passion purchases but also lucrative investments. Fine art from renowned painters such as Picasso or contemporary icons like Banksy continues to draw investors, while trading cards, vintage comics, and rare books have seen a surge in interest, driven by nostalgia and scarcity.

In the digital age, technology-based investments are becoming increasingly popular, too. Domain names, particularly those with short and memorable phrases, can be flipped for substantial profits. Virtual real estate in the metaverse is gaining traction, as platforms like Decentraland and The Sandbox allow users to buy, sell, and develop digital land. Meanwhile, the NFT market has created a new frontier in digital ownership, with everything from digital art to in-game assets being bought and sold for millions. Even in the realm of cryptocurrency, yield farming and staking offer innovative ways to generate passive income.

Nature-based investments provide another avenue for those looking to hedge against inflation while supporting sustainable practices. Timberland investments allow investors to benefit as trees grow in value over time, while farmland remains a stable and productive asset. More specialized opportunities include truffle farming, which caters to the high-end culinary market, and caviar farming, where beluga sturgeon caviar commands premium prices. Rare earth metals like lithium and cobalt are also increasingly sought after, given their crucial role in modern technology.

Some of the even more unconventional investments come in the form of intellectual property and experience-based assets. Music royalties, for instance, enable investors to earn income from streaming and playback rights, while film and television rights offer participation in the entertainment industry’s financial success. Sports memorabilia, including game-worn jerseys and signed equipment, can become valuable pieces of history. The growing interest in space and deep-sea ventures is also opening doors for those willing to bet on the future. Space tourism, asteroid mining, and deep-sea exploration present high-risk, high-reward opportunities that could redefine wealth creation.

For those interested in livestock and rare breeds, exotic animals offer a distinctive approach to investing. Racehorses, often purchased through syndicates, provide the thrill of competition alongside potential financial gains. Wagyu cattle, known for their premium beef, represent a lucrative agricultural investment. Beekeeping and organic honey production have gained traction as sustainable and profitable ventures, while rare ornamental fish and coral farming cater to collectors and marine enthusiasts alike.

As the investment landscape continues to evolve, these unconventional assets provide avenues for those willing to step outside the traditional financial sphere. While they come with their own risks, their potential for returns and diversification makes them an exciting frontier in wealth generation for the bold investor.

Picture: (c) Stokkete—shutterstock.com

Industriens Pension Appoints Marselis CIO as Head of Real Assets

Industriens Pension has named Peter Mikkelsen as its new Head of Real Assets. Mikkelsen, who has served as co-owner and Chief Investment Officer at Danish fixed-income specialist Fondsmæglerselskabet Marselis since late 2022, previously spent the majority of his career at Nordea in various management roles.

“I am delighted to share that I am joining Industriens Pension as Head of Real Assets and Strategic Asset Allocation on 1 March,” announces Peter Mikkelsen on LinkedIn. “A warm thank you to everyone who helped the process along. This is a unique opportunity at an equally unique organisation, and I am really looking forward to getting started.”

“I am delighted to share that I am joining Industriens Pension as Head of Real Assets and Strategic Asset Allocation on 1 March.”Peter Mikkelsen

Mikkelsen will join Industriens Pension on March 1 from Marselis, a boutique that manages two European high-yield strategies and a quantitative global cross-asset allocation strategy. One of the credit strategies employs dynamic leverage and is part of the fixed-income universe in the Nordic Hedge Index. Previously, Mikkelsen held various management roles at Nordea for many years, most recently overseeing the group’s liquid bond portfolio amounting to DKK 370 billion DKK (around €50 billion), as well as its alternative investments portfolio of about €2 billion. Earlier in his career, he held management positions at ABN AMRO Bank in Copenhagen and London.

Mikkelsen succeeds 65-year-old Jan Østergaard as Head of Real Assets at Industriens Pension, part of a planned generational transition. Østergaard will continue in a specialist role within the department, contributing to investment-related product development across the organization. As Head of Real Assets, Mikkelsen will lead a department managing approximately DKK 40 billion, a key allocation in Industriens Pension’s portfolio. The investments are divided into around DKK 29 billion in global infrastructure assets and DKK 11 billion in Danish and international properties. Peter Mikkelsen will also be responsible for optimizing the composition of Industriens Pension’s investment universe to ensure efficiency.

“Peter’s broad background in the investment world equips him well to deliver strong results in complex areas such as infrastructure and real estate.”Peter Lindegaard, the Chief Investment Officer at Industriens Pension.

“I am convinced that we at Industriens Pension can benefit greatly from Peter Mikkelsen’s many years of experience with investments across asset classes at a high level,” says Peter Lindegaard, the Chief Investment Officer at Industriens Pension. “Peter’s broad background in the investment world equips him well to deliver strong results in complex areas such as infrastructure and real estate.”

Shakedown for the AP Funds

The Swedish state pension fund system is seeing of one of its most significant transformations in recent history. The government, backed by the cross-party Pension Group, has proposed reforms aimed at streamlining the AP funds, also known as buffer funds, that act as financial stabilizers for the national pension system. The changes include merging some of the existing funds, tightening governance rules, and adjusting investment regulations. These moves are expected to have profound implications, also when it comes to alternative investments and hedge funds.

For decades, Sweden’s AP funds have played a crucial role in ensuring the long-term viability of the pension system. These funds act as a cushion, absorbing financial shocks and balancing demographic shifts that might otherwise destabilize pensions. The five buffer funds, AP1, AP2, AP3, AP4, and AP6, operate with a high degree of autonomy, managing diversified portfolios that include equities, fixed income, real estate, and private equity. But the Swedish government has long sought to modernize their structure, arguing that consolidation and tighter oversight would improve efficiency and reduce administrative costs.

The cornerstone of the proposed reform is reducing the number of funds from five to three. The plan would see AP6, which specializes in private equity investments, folded into AP2. Given that both are based in Gothenburg, the government sees a natural synergy in this merger. The larger AP2 would inherit AP6’s expertise and, critically, be granted expanded opportunities to invest in unlisted assets until 2036. This may signal a continued and potentially growing commitment to alternative investments.

In Stockholm, the restructuring takes a different shape. The three existing funds (AP1, AP3, and AP4) will be consolidated into two, with AP1 being liquidated. Its assets will be split evenly between AP3 and AP4, creating larger, more powerful entities with increased capacity to make impactful investments. The expectation is that by reducing redundancy, the funds will operate more efficiently, leading to lower management costs and, ultimately, higher net returns for pension savers.

Beyond the restructuring, the reforms introduce regulatory adjustments that will influence the investment strategies of the remaining funds. One key change is the increase in the permissible ownership of Swedish listed companies, from 2% to 3% of total share value. This shift is intended to offset any reduction in investment scope resulting from the fund mergers. However, the government has decided to maintain the existing rule that no fund may hold more than 10% of the voting rights in any Swedish company, thereby ensuring that these large institutional investors do not gain disproportionate influence over corporate governance.

These changes could have considerable effects on the investment landscape, particularly in alternative investments and hedge funds. With AP2 taking on AP6’s private equity mandate, the appetite for unlisted assets appears set to grow, at least in the near term. Private equity firms and alternative asset managers could potentially find new opportunities as the restructured AP funds seek to balance their portfolios with long-term, high-yield investments.

Hedge funds, too, could see an impact, though the direction here is less certain. The consolidation of the funds could mean that fewer, larger entities will be making investment decisions, which could either result in a more concentrated allocation to hedge funds or a shift away from them. Historically, Swedish buffer funds have been somewhat conservative in their hedge fund allocations, preferring to focus on equities, fixed income, and real assets.

The reaction to the reforms has been mixed. The government and proponents of the changes argue that the restructuring will enhance efficiency, reduce costs, and provide better oversight, protecting taxpayers and pensioners alike. Critics, however, caution that the loss of some independent funds might lead to reduced competition in investment strategies, which could dampen overall returns. Some fund representatives have expressed concern about whether the specialized expertise of AP6 will be fully preserved under AP2, despite assurances that its alternative investment mandate will continue.

Fredrik Tauson Transitions to Allocator Side with AMF

After an extensive career in fund management, fixed-income specialist Fredrik Tauson has joined Swedish occupational pension provider AMF as a senior portfolio manager. Formerly a co-founder and portfolio manager at the hedge fund boutique Nordic Cross, Tauson will now oversee AMF’s credit portfolio, working closely with its broader fixed-income team.

“I am impressed by AMF’s stable, long-term returns and their professionalism as an asset manager,” says Fredrik Tauson, sharing his thoughts on joining AMF. The pension provider manages over SEK 800 billion in assets, with about 13 percent allocated to credit bonds. “This is an exciting mandate and I look forward to being able to act more long-term with the credit investments compared to a typical daily-traded credit fund,” he adds, noting that the role gives him the opportunity “to act tactically and opportunistically from time to time.”

“This is an exciting mandate and I look forward to being able to act more long-term with the credit investments compared to a typical daily-traded credit fund.”

Tauson began his career in the early 2000s at Nordea before transitioning to Öhman Fondkommission in 2007, where he served as a senior credit analyst for three years. He later joined the then-called Catella Fonder as a fixed-income portfolio manager, a role he held for approximately seven years. During his tenure at Catella, Tauson worked on both fixed-income-focused vehicles and managed the fixed-income component of the renowned multi-strategy hedge fund, Catella Hedgefond. In 2016, he co-founded the hedge fund boutique Nordic Cross alongside former colleagues from Catella.

After six years at Nordic Cross, Tauson transitioned to Coeli in late 2022 as a portfolio manager, following Carnegie Fonder’s takeover of the Nordic Cross funds. After two years managing Coeli’s fixed-income products, he has now shifted to the allocator side, taking on the role of senior portfolio manager at AMF.

Iivo Paukkeri to Leave Aalto University Endowment

Iivo Paukkeri is stepping down from his role as Head of Investments at Aalto University’s endowment fund in Finland to join the family investment company of Finland’s wealthiest individual, Anttii Herlin, and his children. After more than 15 years at the endowment fund, Paukkeri will join the family office Security Trading Oy at the beginning of 2025.

“After 15 years at Aalto University, I’ll be moving on at the end of the year,” Paukkeri announced on LinkedIn. “It has been a unique opportunity to build the university’s endowment since its inception. Now the job is open for someone else to take it further,” he added. “On a related note, I’m looking forward to joining the team at Security Trading Oy, a family office, in January.” Before becoming Head of Investments in early 2020, Paukkeri spent a decade as a portfolio manager at Aalto University’s endowment, focusing on hedge funds and liquid alternatives.

Aalto University is now seeking a new Head of Investments to manage its €1.5 billion endowment fund. The Aalto University endowment builds its portfolio around several risk-based building blocks, including interest rate risk, credit risk, equity risk, and alternative risk. The “alternative risk” building block features market-neutral diversifying strategies such as trend following, systematic risk premia, equity market-neutral, global macro, relative value and arbitrage strategies, among others.

At the close of 2023, Aalto University’s endowment had 18 percent of its portfolio allocated to alternative risk. This segment delivered a return of 11.1 percent in 2022 and 2.2 percent in 2023, generating an annualized return of 2.1 percent from mid-2010 through the end of last year. Overall, Aalto University’s endowment portfolio achieved an annualized return of 5.4 percent from mid-2010 to the end of 2023.

Photo by Unto Rautio

RFP: Nordic Institution Eyes Opportunistic Private Credit

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A Nordic institution plans to allocate approximately €10-15 million to a private credit fund focused on opportunistic or special situation direct lending. According to Global Fund Search, the investor is exploring opportunities within the European opportunistic and special situation private credit space, with a potential commitment to such a strategy in 2025.

Search Criteria

  • Strategy: Corporate direct lending strategies in the European opportunistic/special situation space. Preferably senior secured.
    • Hard restriction: No exposure to tobacco producers.
  • Return target: Net IRR of 15% or higher measured in EUR (after hedging costs)
  • Timing: Funds that are targeting Final Close no earlier than Q2-2025 
  • Geography: Europe
    • Global funds are also possible of interest, but no pure Asian funds etc.
  • Fund term:
    • Investment period: 2 – 4 years from Final Close
    • Total term: 7 – 10 years

Investment vehicle

  • A traditional closed-ended structure (could possibly consider open-ended/evergreen with option to structure the investment as a closed-ended fund
    • Hard restriction: Opaque fund structures

Deadline
October 10, 2024 (Cut-off: Midnight CET, Expiry date inclusive) 

To review the search and apply, asset managers need to register here on globalfundsearch.com

Questions?

Please contact support@globalfundsearch.com

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