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Catella Nordic Long Short Equity IC

The objective of the Catella Nordic Long/Short Equity fund is to deliver competitive returns regardless of market conditions.

The fund invests mainly in Nordic equities. 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, over time, to have low co-variation with the equity market and may thus both raise the expected return and lower the expected risk in a traditional equity and fixed income fund portfolio. The portfolio is structured in two parts, consisting of long and short equity positions respectively, which are both expected to contribute to the fund’s characteristics while jointly creating a favourable balance between risk and return. Investments are based on a combination of traditional equity research and quantitative methods. The fund’s target is to generate annual return of 5-10% with a standard deviation of 5-10% over time.

October was as black as night for world stock markets, with the MSCI World Index falling 7 percent.
Martin Nilsson, 2018-10-31

October was as black as night for world stock markets, with the MSCI World Index falling 7 percent. Europe was the best performing major region in relative terms. The VINX Nordic index fell 7.1 percent.

Reported US economic data has been good, with one example being a fall in unemployment to 3.7 percent, the lowest number since 1969. Europe and China are seeing cooler signals, and China reported its lowest GDP growth since 2009. Given its softer growth, China has implemented a series of stimulatory measures, including this month a proposed halving of the tax on small car purchases.

Catella Nordic Long Short Equity performed very weakly this month, falling 7.5 percent. The main reason for the decline was that our long holdings in the energy sector greatly underperformed the market, from having been the winners before this month's downturn. Outotec fell sharply when it announced information about a problem with one of its projects. It is currently too early to determine where the responsibility lies, and the company will provide additional information when it becomes available. The stock has recovered from its slide. Our short positions are mainly in companies with very high valuations, and even though these fell and made a contribution, they were not impacted to the same extent as the wider market.

We reduced our holdings this month in Outotec and energy-related stocks. Our view is that October's decline was a correction similar to those we have seen in recent years, but it is important not to be overconfident since large stock market falls have historically been an early indication of a weaker economy. Our fundamental view, however, is that the economy will remain strong and that many Nordic companies are attractively valued.

Fund facts

Risk Indicator

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. Category 1 does not mean that the fund is risk free. The fund may over time move towards the left or right of the scale. This is because the indicator is based on historical data which is not a guarantee of future risk and reward. For information about the risk classification of each fund, please refer to the fund’s key investor information document.

Facts

We have drawn on the experience of our Catella Hedge multi-strategy fund and created Catella Nordic Long Short Equity.

Catella Nordic Long Short Equity strives to consistently deliver positive returns in which the balance between risk and reward, the risk-adjusted return, is competitive. The objective is to manage an equity portfolio that provides unit holders with positive returns in both rising and falling markets through a portfolio that has a high correlation with the stock exchange in a rising market and low correlation in a declining market. The fund invests primarily in equities listed on the Nordic exchanges.

Strategies with long and short equity positions are characterised mainly by their ability to generate good asymmetric returns. Compared with portfolios containing only long positions, a long/short portfolio can protect investors from the consequences of protracted periods of falling stocks. The fund is able to deliver good returns in a positive equity market as well as in a negative equity market.

The fund is suitable for investors who are looking for Nordic equity exposure and a fund that takes advantage of both positive and negative developments in the stock market.
The fund is permitted to use derivatives and to have a larger percentage of the fund invested in bonds and other debt instruments issued by individual central government and municipal authorities and within the EEA than other securities funds.

Target return: Absolute return with a good risk-adjusted return

The fund is a Luxembourg-listed UCITS fund and is traded daily. The minimum deposit is SEK 10 million. If you are interested in investing a smaller amount please refer to Catella Nordic Long Short Equity RC.

Historical development

Fund manager

Sweden

Ola Mårtensson

Fund manager
Direct: +46 8 614 25 79
Sweden

Martin Nilsson

Fund manager
Direct: +46 8 614 25 64

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