Catella Nordic Long Short Equity RC

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.

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Fund manager comment

Global stock markets continued to rise in April. Copenhagen was the weakest of the Nordics at -0.2%, and Stockholm was the best performer at +5.7%. But there were lots of dividends this month and, with these reinvested, all the Nordic markets were up. The upswing was driven by a combination of hopes for a better economy in the second half of the year, an upcoming trade deal between China and the US, and by central banks not upping interest rates. Macro data as a whole was quite weak during the month, and inflation has remained low, which influences the central banks. One of the softest central banks is Sweden's Riksbank, which pushed down the krona and favoured export industry. The reports have been mixed, but as a whole were still slightly better than feared given the weak macro data.

Catella Nordic Long Short performed well and rose 5.2% this month. The net exposure has been low, which means that this month's strong performance is the result of good stock picking. Given the strong market it was natural for the long side to make the biggest contribution, but it is also worth noting that the short positions performed much worse than the stock market. The biggest contributor this month was security company G4S, which rose sharply on speculation of a buy-up. The fund's exposure to cyclical companies like Outotec, SSAB and SKF also performed well. The short positions in Getinge, DSV and Kone pulled down the month's results. Our exposure has remained cautious. With the stock exchange's valuation back in the range that prevailed before the market slump, we believe it is wise to have a cautious approach to further risk-taking and are keeping the net close to zero – gross exposure at the end of the month was 143 %. During the second half of the month, the fund's exposure to cyclical companies was reduced somewhat and the gross exposure has therefore been reduced slightly. We are concerned that the stock market has priced in the best of all worlds, with soft central banks and an improved economy in the second half, and there is a significant risk that one of these will fail to happen.