Investments in fund units are associated with risk. Past performance is no guarantee for future returns. The money invested in a fund can increase and decrease in value and it is not certain that you will get back the full amount invested. No consideration is given to inflation.
The objective of Catella Hedgefond is to achieve stable returns at low risk, regardless of market conditions.
The fund invests mainly in Nordic equities and bonds. The fund applies negative screening for sustainability criteria and consequently avoids long positions in companies that produce tobacco, alcohol, commercial games for money, pornography, coal, or weapons. Derivatives are used in management to protect fund capital and increase return opportunities. The fund is expected to have low co-variation with performance in the equity, credit and bond markets and may thus both raise the expected return and lower the expected risk in a traditional equity and fixed income portfolio. In structuring the portfolio, strong emphasis is placed on spreading risk and preventing any individual holding or sector from having excessive influence on fund performance. Investments are based on fundamental analysis of individual companies and traditional macroanalysis. The fund's target is to generate annual return of 3-5% with a standard deviation of 3%.
During April and May the relationship between growth stocks and value was as stretched as during the .com-bubble year 2000 while since May there has been a rotation in the favour of Value.
Fund manager comment
Catella Hedgefond rose +1,44% during the month and both equity and fixed income contributed to the performance. As we have written in previous monthly newsletters, our working hypothesis has been that economic activity will gradually resume as mobility in society increases and that the equity market would be willing to discount this as we passed the peak of number of new covid-19 cases. Based on this assumption we have positioned us in companies that have been punished on what we deem to be temporary effects (as opposed to companies and sectors where the consequences of the pandemic are more far reaching).
During May two such positions were the biggest contributors to performance: care company Ambea rose by 22% together with media company Nordic Entertainment which rose in value by 21%. Also Rockwool had a positive performance (+31%). The fund's worst positions were short positions in Addtech (+30%), Evolution gaming (+25%) and Atlas Copco (+9%). A bond holding in Georg Jensen also contributed negatively to the performance during the month.
We continuously try to identify companies that are attractive from a valuation, forward looking and risk perspective (the opposite for short positions). What has been difficult for us previously has been the market's inclination to make expensive companies even more expensive and cheap companies cheaper, while we have thought how far can you stretch this? During April and May the relationship between growth stocks and value was as stretched as during the .com-bubble year 2000 while since May there has been a rotation in the favour of Value. If this is the beginning of a longer trend or just a brief one remains to be seen, but we see many opportunities to own companies with low valuations and be short what we perceive to be companies that are overvalued.
After a strong April, the equity markets started May on a weak note and after the middle of the month for example Eurostoxx 50 had lost almost 6% since end of April, primarily driven by the uncertainty regarding the implications from the corona virus. The turn came after the pharma research company Moderna presented promising indications on their covid-19 vaccine. During the remainder of the month, the markets reacted positively from encouraging virus statistics from Europe, concrete and credible time plans on how to open up societies and several indications that the economic activity gradually is improving around the world.
In parallel to this, the debate continues whether the risk for a second wave of virus spread could hamper the recovery as well as if valuations now discount a too optimistic scenario.
In order to complicate the picture further, the presidents Trump and Xi have started arguing again on the geopolitical stage. Nordic shares (MSCI Nordic total return) ended the month +4,6% and all Nordic indices closed higher; Stockholm +3,3%, Copenhagen +8,3%, Oslo +1,0% and Helsinki +6,9%. Internationally MSCI World increased +4,6%, S&P500 with +4,5% and Eurostoxx 50 rose +5,3%. Long term interest rates were rather stable during the month of May while crude oil rose in strong fashion (Crude +62%).
The risk and reward indicator illustrates the link between risk and potential returns from an investment in the Fund. The indicator is based on how the fund's value has changed over the past five years or the highest permitted risk for the fund. Category 1 does not imply that the fund is risk-free. Over time, the Fund’s risk indicator may change both upwards and downwards. This is because the indicator is based on historical data for the Fund’s model portfolio, which is not a guarantee of future risk/reward.
Catella Hedgefond fund's objective is to deliver consistent, positive returns regardless of stock market trends.
To make money in both market upturns and downturns, the fund managers invest in Nordic fixed-income securities and equities, and gain protection from downturns through derivatives. This means that timing is not an issue when investing in Catella Hedgefond, and low risk is a cornerstone of the fund. The fund is run by a total of four managers. The team's experience and knowledge generate the management performance.
The fund is traded daily, making your money normally available immediately. Over time, the fund has had a high risk-adjusted return. This is a fund for investors seeking a solid base for their savings.