45 percent return. That’s the conclusion so far this year of Tor Svelland’s hedge fund Svelland Capital, which manages about NOK 1.6 billion. The fund mainly invests in stocks and futures contracts related to freight and raw materials.
In October and November, the fund rose nine and five percent, respectively. According to Hedge Nordic, Svelland Capital is the best-performing Nordic hedge fund this year – and the past five years combined.
Sveland noted in July Shippers transporting oil and liquefied natural gas (LNG) are cited as big opportunities on the Oslo Stock Exchange – an prediction that was correct. Svelland still believes there is more to be done in LNG, but now he’s also highlighting dry goods as an attractive investment.
Svelland is also seeing higher oil and aluminum prices. Svelland sees perhaps the biggest opportunity in copper, where he believes the price could rise by about 50 percent.
– Everyone should have electrical and electrical things, but no one should extract the raw materials for this. It’s an absolute mismatch, and we’re becoming more and more people on Earth. Betting on copper is a very dangerous business. It will explode, says Sveland.
Witness the rise in oil prices
Svelland was more moderate in his estimates than many other experts, but he is among those who state that the tight oil market has called for an oil price of $130 in the second half of 2022, without that becoming a reality.
One reason is that algorithm-run funds that trade based on trends, so-called CTA funds, have cut oil prices sharply in periods. This is despite the fact that the fundamental conditions in the market haven’t changed much, according to Sveland.
– It also had a lot to do with the fact that China didn’t import much, coupled with recession fears and people did what they could to avoid buying expensive oil. At the same time, oil inventories have been drawn down, but stocks are now historically low, he says.
With the prospect of China’s reopening, the European Union’s ban on the import of Russian oil transported by sea, as well as declining oil inventories, Sveland believes there are many reasons for oil prices to be significantly higher than current levels.
Before the weekend, the G7 countries and Australia also decided A price ceiling for Russian oil was set at $60 a barrelIt is a price ceiling that the Kremlin has said it will not accept. Svelland isn’t sure how well the price cap works in practice, but he’s clear on one thing:
– This really provokes the Russians. They will sit back and take oil off the market, which will drive up oil prices even more.
Svelland recently attended investor conferences in Zurich and Barcelona. He and his industry colleagues, he says, are becoming increasingly convinced that simply putting money in index funds won’t be a winning formula, and he hopes big US tech companies will make you rich.
Mary Erdos, head of asset management at US JP Morgan Bank, said recently that it was not easy to find excessive returns in various assets. Erdoes believes it is “irresponsible” to be negative now, referring to major shifts in monetary policy, energy security and geopolitics.
Being a passive investor who believes in technology and invests in the NASDAQ, or someone who believes in the global economy and invests in the S&P 500, this form of investment alone is less attractive. Active management now applies, Sweland says.
Hedge funds are “hyperactive” funds that use advanced and complex financial instruments to neutralize risk. They can bet on falling prices (going short) and so in theory should be able to make money even in a bear market.
However, it is not automatic for hedge funds to succeed in this: The Hedge Nordic benchmark, which measures the development of hedge funds in the Nordic countries, has fallen by about seven percent this year. By comparison, Oslo Bor is virtually unchanged.
– How do you explain it?
– In recent years, many people have called themselves hedge funds, but in fact they have done exactly the same thing as everyone else. They bought the technology and sat on it. They haven’t taken an active approach, Sveland says.
You should hope for an increase
Investor Peter Hermanrud goes against Svelland’s recommendation to seek active funds. He believes that the smartest thing for the average investor to do is to invest steadily in global index funds to maximize diversification.
– I am convinced that in the long enough term, it is better to have the money in stocks than in the bank, and for most people, index funds would be the better alternative, as they have lower costs and give a better expected return, says Hermannrod.
There will be some hedge funds and active funds that will do brilliantly in the next few years, but the trick is to find them. Over time, index funds have outperformed the vast majority, says Hermannrod.
There was no shortage of warnings that the US stock market was too expensive at the start of 2022, which was often tried to explain the fact that interest rates were so low that there was no real alternative. This is no longer the case.
It’s true that the market has been very expensive, but I really think the vast majority of people should just hope that the market will go up all the time. In hindsight, it’s easy to see that the market will go down — but that’s only in hindsight, says Hermannrod.
– Get off more
Even if a sharp rise in interest rates has already begun to affect the economy, Sveland does not believe that it will be enough to dampen demand for oil and other important raw materials so much that it causes prices to collapse. Thus, there is no reason to be too afraid of heights in the Oslo Stock Exchange.
– We are now entering a recession in Europe, but not in the United States. We could see a mild recession there, but with the situation we’re facing in terms of supply and demand, we need a severe recession to get a real recession, says Svelland.
Oslo Bors looks cheap, notes Hermannrod, if you look at the price as measured against expected earnings next year, the so-called price/earnings (P/E). Yet he is skeptical.
– I think earnings will fall more than the market thinks, because we are heading into an economic downturn that could be severe. It also comes after a period when the market was very good, and then I think the odds are a little bad, says Hermannrod. (Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For additional terms look here.
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