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EXCALIBUR

More people looking to
reduce risk after a decade

of stock market gains

Excalibur offers fund management on the interest rate market to both
institutions and individuals. Its aim is to achieve positive returns at low risk
regardless of market conditions. This is something the fund has achieved almost

every year for two decades. And 2021 was no exception.

The fund invests for absolute returns and seeks the market this kind, you’ll find it easier to spot the next one. And there are always
alpha, which means that the fund should see positive returns overreactions during both upturns and declines. We can recognise
regardless of the market situation. Things have gone well to an overreaction when we see one. It’s all a matter of judgement and
date. Excalibur celebrated its 20th birthday in 2021, and in all this time timing – that’s how we create returns.”
the fund has seen positive returns every year except for two. The fund
has been nominated as one of Europe’s best fixed income hedge funds RAPID RECOVERY FOLLOWING THE PANDEMIC
by the Eurohedge Awards. This year’s overreactions and surprises in the financial markets
include the unexpectedly rapid recovery following the first COVID
The fund has returned about 5 per cent per annum on average since shock. Emphasis then shifted to the vaccine rollout, where the market
it began. This may not sound like much compared with the stock rejoiced at times, trembled at others. Moreover, rising inflation has
market rises in recent years, but the fund’s investments involve much taken the world’s major central banks by surprise. But in hindsight, just
lower risk than stock investments. how surprising is it that worldwide downsizing of production, transport
stoppages and increasing protectionism among the US, China and
NEED FOR LOW RISK MANAGEMENT Russia should cause a supply bottleneck, resulting in increased prices?
There’s a need for low-risk asset management, although this has all
but been forgotten over the last decade because interest rates have “We’ll see central banks cutting back on bond interventions in the
been so low and yielded non-existent returns. The stock market has first stage of this development, which means market interest rates will
risen largely due to the lack of alternatives offering returns, and so be allowed to rise. We can exploit this by taking forward positions. We
most investors – including small savers – have been tempted to take also expect inflation in Sweden to reach 4 per cent by the end of 2022.
ever-increasing risks. That’s twice as much as the inflation target set by Riksbanken. We’ll
have to wait and see what that involves.
“We experienced a difficult period with net outflows from the fund,
where customers took their money and went elsewhere. But we’ve had Excalibur trades in securities denominated in Swedish kronor, euros
a net inflow in 2021. It’s obvious that more people reckon it’s time to and dollars, about one-third each. This, too, is a way to access market
reduce their risk after a decade of stock market gains.” opportunities while also balancing risk. Thanks to new deposits, fund
assets at year-end stood at around SEK 600 million, representing a net
Achieving absolute positive returns regardless of market situations, increase of around 20 per cent. Returns to fund shareholders stood at
at low risk, is a tricky task, requiring an in-depth knowledge of the around 4 per cent after fees.”
market. But it is possible, with extensive experience of previous shifts
in the economic cycle – and of factors that influence what’s known as CEO Thomas Pohjanen
market sentiment. Thomas Pohjanen and his team have precisely that
experience, having worked on the interest rate trading floor of what
used to be Nordbanken.

“Buying a bond and then just holding onto it is completely pointless
if it doesn’t pay any interest. We trade on movements and mispricings
in the interest rate and money markets. Getting older is a great
advantage in this job, because the market tends to evolve in cycles
and we see movement patterns recurring. If you’ve seen a few cycles of

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