Fri, 17/03/2006 - 06:59
Oslo-based Dag Rosmo outlines Interkraft Capital Management's trading focus on the Nordic power markets and reveals plans to launch a new fund in 2006.
Rosmo has been the Managing Partner, Interkraft Capital Management ASA (ICM) since 2003. ICM is an Oslo-based, specialised asset manager currently managing approximately USD115 million in the Nordic Power Market in cooperation with Elkem AS. From 1998 to 2002, Dag was Partner and then Senior Partner in Alfred Berg Industrifinans (ABIF), which is part of ABN AMRO in Norway. At ABIF, he was responsible for product development/ structured products/hedge funds, 3rd party sales and key private accounts. From 1996-98, Dag worked with Barclays de Zoete Wedd (BZW) and was responsible for all equity derivatives sales in Switzerland. Prior to this, Dag worked with Credit Suisse in Zurich, Switzerland where he was promoted to vice President in end-1995. Dag majored in Banking and Finance from the University of St. Gallen for Business Administration, Law and Social Sciences in Switzerland.
HW: What is the background to the fund?
DR: Interkraft Energy Fund was launched on August 31, 2001 as the world first managed futures fund in the power sector. So far we have only been trading Nord Pool (www.nordpool.com) contracts. We have a trading cooperation with Elkem Energy (www.elkem.com). I am the Managing Partner, the Head of Systematic Trading is Einar Lindestad, and the Head of Trading at Elkem Energy is Eirik Sandvik. We currently manage approximately USD 130 million in this strategy (Interkraft Energy Fund and managed accounts).
HW: How and where do you distribute the fund? What is your current and targeted client base?
DR: We participate in a few databases and have contacted a few institutional investors directly. We don't employ any marketing staff. Our current client basis is mainly FoFs, future client base may include more direct investments from institutional investors.
HW: What is the investment process of your fund?
DR: We have a multi-strategy approach. We trade three main strategies; Fundamental trading, opportunistic trading and system trading. The fundamental trading is based on the differences between the market forward curve and our analytical forward curve. The opportunistic trading is conducted by three senior traders trading freely within a strict risk framework. The system trading is model based trend trading. This trading is based on quantitative research and hold positions only in the front season contract. The strategies are implemented in a total of five portfolios managed by 4 traders and three analysts.
HW: What is your approach to managing risk?
DR: Each of the five portfolios get monthly risk limit allocations. We have dVaR limits on each individual portfolio and a number of other limits (spread, energy, liquidity etc). We apply real time calculations and monitoring and employ two full time risk-managers. We only trade cleared contracts. We are targeting a maximum drawdown of 5% for a calendar month and volatility below 10% (annualised monthly return number). Average dVaR over night was approximately 1% last year, in line with expectations.
HW: How/against what do you benchmark the performance of your fund?
DR: We don't have any benchmark but measure and publish a number of key ratios.
HW: Has your performance been as per budget and expectations? Do you expect your performance or style to change going forward?
DR: We control risk, not return. Our risk targets have been met. Our annualised return for Interkraft Energy Fund since inception is 15.35% (EUR as of Jan 31, 2006).
HW: What opportunities are you looking at right now?
DR: We're currently evaluation trading the German power market and EU emission rights.
HW: What events do you expect to see in your sector in the year ahead?
DR: Liberalisation and structure reforms in Europe to continue, more liquid and efficient derivatives markets (power, emissions, coal, gas, freight)
HW: How will these changes/future events impact on your own portfolio?
DR: More opportunities both in calendar and product spreads.
HW: What differentiates you from other managers in your sector?
DR: Longer track record, diversified approach, risk management, experience
HW: Do you have any plans for similar/other product launches in the near future?
DR: We are planning to launch a new fund during 2006. This will be a multi-securities fund based on our system trading approach.
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