Catella Hedgefond – strong new team, same objectives!

Martin Jonsson says, "It's been a fun and intensive time. As a team we have been able to meet lots of clients, which always provides extra energy. During the autumn we had to balance some level of outflow, but this has now stabilised or reversed. We're now completely done with replacing the old portfolio with our own. It's more diversified and has a better balance between long and short positions in the equity mandates. We started the new year feeling that we've really put our own stamp on the portfolio."

Catella Hedgefond is still a low-risk fund. Volatility has historically averaged around 3 percent, and that is where we intend to stay going forward. At the moment it is a little below, but this is linked to the general low volatility in the market right now, which will not last forever. But compared to how Catella Hedgefond has been managed previously, we will have less correlation with the stock market. Low correlation is key to the product's reason for being, in order to contribute to risk-adjusted returns in our clients' portfolios.

"We have more company-specific shorts," says Martin. This gives lower net exposure and less need to hedge with index. Shorts can, and should, independently create alpha, not just reduce the net exposure. Another change compared to the past is that we want to have a more diversified long and short book. We do not plan to increase individual holdings to 7-8 percent of the fund going forward, but with a more diversified portfolio we can have more relatively large positions, each of 2-4 percent.

Catella Hedgefond currently has four equity mandates, divided between four fund managers, and one fixed-income mandate with two managers. The equity managers have divided up the analysis between themselves according to different sectors, which allows for greater specialisation and permits them to dig deeper into individual investment cases. Catella Fondförvaltning has a Nordic focus, which further improves the capacity for fundamental analysis through close relationships with the companies. This enhances the ability to create alpha in the fund management.

Anders Wennberg says, "We work fundamentally and have built our own valuation models for our companies, with our own forecasts. We like to get a feeling for whether the market's forecasts will be raised or lowered, since this often drives share prices, but modelling the financial results of our companies also helps us to better understand the value drivers of each company and thus have better dialogue with company management. Quite simply, we go one step further in our analysis."

Forecast adjustments are important to share prices, but so is how the "story" of the share changes; what the market is focusing on right now, and how this story could change in the future. A broad network of relationships among brokerages and other fund managers is the key to understanding this better, but so is a measure of imagination and the ability to look around the corner. It is more important to have a sense of how the story is changing than to know what the story is today.

As a team we are "style sceptics". What do we mean by that? Take the example of the period 2013-2015, when stable high-quality companies outperformed cyclicals, and many fund managers created management styles such as "we invest in good companies" or in "growth". But in January/February 2016 cyclical companies became too undervalued and have had a fantastic upward journey ever since. We believe it pays to have a flexible approach to the market and to the type of company that will perform well in whatever current market – this is what it means to us to be style sceptics. Our focus is placed on the process of fundamental analysis in order to identify value in individual situations, regardless of the market or the latest investment style.

Catella Hedgefond has had a fresh start, and 2017 has begun promisingly. The remaining part of the year will certainly offer a wide range of challenges and opportunities for its ongoing management, but that is exactly how we want it. Our objective is to continue to provide a good risk-adjusted return - regardless of market conditions.

Important information
Investments in fund units are associated with risk. Past performance is no guarantee of 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 Catella Balanserad, Catella Credit Opportunity and Catella Hedgefond funds are special funds under the Swedish Alternative Investment Fund Managers Act (SFS 2013:561) (AIFM). Catella Reavinstfond and Catella Småbolagsfond may use derivatives, and the value of the funds may vary significantly over time. The value of Catella Sverige Index may vary significantly over time. Catella Avkastningsfond may use derivatives and may have a larger proportion of the fund invested in bonds and other debt instruments issued by individual national and local authorities and within the EEA than other investment funds, in accordance with Chapter 5, Article 8 of the Swedish Investment Funds Act (SFS 2004:46). Catella Nordic Long Short Equity and Catella Nordic Corporate Bond Flex may use derivatives and may have a greater proportion of the funds invested in bonds and other debt instruments issued by individual national and local authorities and within the EEA than other investment funds. For more details, complete prospectuses, key investor information, and annual and half-yearly reports, please refer to our website at catella.se/fonder or phone +46 8 614 25 00.