Catella revamps hedge funds after major pull out

At the end of October, alternative multi-strategy funds domiciled in the Nordic region had a net outflow at EUR 241m, echoing the development in Europe. The fund with the highest negative net flow YTD was Catella Fonder’s Hedgefund, whose negative net flow totaled EUR 266m. Catella Fonder CEO Fredric Calles comments.

Fredric Calles, CEO of Catella Fonder. | Photo: PR Catella.

Sweden's Catella Fonder is in the process of reviewing the strategy behind its absolute return funds after a tumultuous early 2020.

CEO Fredric Calles notes that despite a gloomy start to 2020, the future now looks brighter for the company’s three hedge funds, and their losses are starting to be recovered.

"We have three hedge funds, a small EUR 14m fund called Nordic Long Short, the hedge fund of approximately EUR 350m, and a credit fund called Credit Opportunity with an asset volume of EUR 60m. In Credit Opportunity fund we are now back at high water mark and generating performance fees and in the hedge fund performance is now a few percentage points short of high water mark after a very solid autumn," Calles says.

"So, we are doing a comeback."

Worst-selling YTD for absolute return funds

Earlier this month, the Financial Times reported that European-domiciled absolute return funds are on track to recording their worst-selling YTD after suffering from poor performances during the Covid-19 market shock. In the Nordic region, the development of alternative multi-strategy funds echoes the development in Europe overall and had a net outflow of EUR 241m.

The fund with the highest negative net flow YTD is Catella Fonder’s Hedgefund, whose negative net flow at the end of October totaled EUR 266m.

Calles notes that one of the most important reasons for investors pulling out of hedge funds is the lack of market neutrality in the funds’ strategies.

"Many absolute return funds are long-only funds in some aspects, make money when markets go up, and lose it when markets go down. But they should have some kind of market neutrality, uncorrelated performance in their strategies. Many funds, including our funds, have failed to deliver on that. That is one of most important reasons for investors to pull out money," Calles says.

Another reason for the outflows in Calles view is that some absolute return funds have also failed to communicate clearly and precisely to investors about how they operate.

"If you look at what different funds tell investors they are supposed to do for the investor, maybe they don’t do that all the time," Calles says.

Changes in fund strategies

Calles notes that Catella Fonder had rather tumultuous March and April due to the global Covid-19 pandemic, but recovery is now seen in all of the company's 13 funds.

"We had wrong position and we lost money, which hurt us in terms of our AUM, but have since then come back quite significantly in all our products," Calles says.

But what measures is Catella Fonder itself taking in order to amend the earlier losses and negative net flow?

By making changes in its strategies, launching new products in existing and new verticals  and the way the company positions itself, Calles says.

"We have done changes in our fund strategies, how we position ourselves in the different funds. We've done changes in the way how we work as a team instead of individuals, in order to gain more of an information exchange between asset managers," Calles lists, and says that he is ready to return to the topic in detail in early 2021.

"It has been a rather short time since August when I took over as CEO, but we see some progress already and have a clear plan going ahead," adds Calles, who previoiusly worked as the Head of Alternative Investments for Catella Group.

Ultra-short-term bond funds seen high inflow in Nordic region - absolute return funds suffer outflows 

Absolute return funds are on the road to worst-selling year ever

Carnegie Fonder poaches new head of sustainability from Catella

Catella IM Benelux expects 2020 acquisitions to reach EUR 300m under new managing director 

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