Best Hedge Fund in Sweden Posts Historic Volatility Returns

By Love Liman and Niklas Magnusson  

Lynx Asset Management AB, which operates Sweden’s top-performing hedge fund, says the recent surge in market volatility has driven its best performance since it was created 16 years ago.
“It’s become more exciting,” Chief Executive Officer and Co-Founder Svante Bergstroem said in an interview in Stockholm. “The second half of 2014 was very positive for us and since April we have had nine consecutive months with a plus, which we have never had in the history of the fund.”
The $5.5 billion fund has profited from disruptions caused by a slumping oil price, central bank stimulus and even sanctions against Russia. The fund’s investments are determined by its proprietary model, which tracks patterns in financial markets, Bergstroem said.
Lynx’s performance coincides with more demand for hedge fund services as markets grow less predictable. According to Chicago-based data provider Hedge Fund Research Inc., allocations to hedge funds rose last quarter “as financial market volatility soared into year
-end led by a steep decline in oil, euro-currency weakness and sharp drops in both the Russian ruble and equity markets.”
A total of $3.6 billion of new capital was allocated to hedge funds globally in the period, bringing inflows during 2014 to $76.4 billion, the most since 2007, Hedge Fund Research said in a report published Jan. 20.

Hiring Staff

“We like it when there is a bit more volatility and bigger movements in the market,” Filip Borgestroem, a partner and the head of business development at Lynx, said in an interview. “We then tend to see stronger trends and more opportunities for our strategy.”
Lynx Asset Management’s Bermuda-based Lynx fund returned 14.2 percent last year, according to data compiled by Bloomberg, which covers the 10 months through October. Including the final two months, the fund generated a 27 percent return. In the year through Jan. 16, it’s already up 4.08 percent.
Its performance means it can add to its roughly 50 employees in 2015, Bergstroem said. The fund shouldn’t exceed about $12 billion, because at that size returns will be harder to generate, he said.
Lynx allocates about 24 percent of its investments to fixed-income, 20 percent to currencies, 28 percent to stocks and 28 percent to commodities. Its best bets in recent quarters include a weaker euro and lower long German rates, Bergstroem said.

‘Very Profitable’

Both “were very profitable for us last year,” he said. The fund also made money on energy markets. “We have been short oil during that decline,” he said.
Lynx’s models still show commodity prices will fall, as will agricultural products and industrial metals. The fund is short the euro and the pound, though it’s scaled back its oil bet, he said.
“If you look at our positions right now we’re still long the stock market, so there the models suggest they will continue to rise,” Bergstroem said. “The U.S. currently looks strongest but we’re also a bit long Asian and European stock markets. The dollar bet is also quite strong -- that the dollar will strengthen against the yen and the euro.”