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%.
On the winning side, Rockwool (+15%) was the largest contributor. Rockwool is a new position in the fund and a share that we believe has bottomed out in terms of price and also has a strong environmental profile that is not fully priced in at present.
Fund manager comment
Stock markets have been driven upward during the year with support from, above all, the Fed’s looser monetary policy and, in recent months, the prospects of a turnaround in manufacturing in the coming quarters.
While half a year ago we thought that many cyclical shares had been downgraded far too much, despite the decline in leading indicators, we are now beginning to doubt whether any recovery will be strong enough to justify prevailing values in, for example, the engineering sector.
Most of our long holdings are less dependent on the business cycle and/or are able to influence their profit development to a large extent through internal improvements, while their valuations are reasonable from a historical perspective. The short side is largely characterised by companies with high valuations that we believe may have downside operational surprises going forward.
Our five largest short positions are valued at 23x next year’s earnings, which is more than 50% higher than the average over the past ten years. The Nordic stock market as a whole is currently valued 18% higher compared with the same time period. Nordic equity markets showed mixed performance in November, and the Stockholm stock exchange (OMX total return) rose 1.9% including dividends. However, the small cap index (CSX) increased by as much as 4.2%, while larger companies (OMX30) remained unchanged as the heavy-weight banking sector reduced the return in the wake of new concerns, mainly about money laundering. The Copenhagen stock exchange was strongest in the Nordic countries (+5.5%), while the performances of Oslo (+0.5%) and Helsinki (-0.3%) were quite modest. The overall performance internationally was strong, with MSCI World +3.2%, S&P 500 +3.6% and Euro Stoxx 50 +2.8%.
Asian stock exchanges also showed positive growth despite the unrest in Hong Kong. Trade talks between the US and China continued to be the focus, and on several occasions during the month it was suggested that a partial agreement was close at hand, which gave momentum to the stock markets. American (1.77%) and German (-0.36%) long-term interest rates were relatively unchanged, while the Swedish 10-year bond yield rose around 12-13 basis points to claw itself above the zero line (0.02%).
Catella Hedgefond fell -0.37% in November. Unfortunately, a positive contribution mainly from the fixed income side was not enough to compensate for a handful of non-correlated negative corporate events at some of our larger long holdings. SEB (-11%) fell on a television documentary from Uppdrag Granskning, Elekta (-11%) issued a profit warning and Boozt (-18%) reported that sales growth that was weaker than expected.
On the winning side, Rockwool (+15%) was the largest contributor. Rockwool is a new position in the fund and a share that we believe has bottomed out in terms of price and also has a strong environmental profile that is not fully priced in at present. Ambea (+4%) and Demant (+17%) also made a positive contribution to the return, despite the fact that Ambea’s share price suffered during the month from a large sell-off by major shareholder KKR.
Our long positions rose by +1.8% on average while our short positions increased by +3.0%. Adjusted for the above slides (SEB, Elekta and Boozt) as well as Ovzon, the long holdings developed in line with the short ones.
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.