Scandium Asset Management has pioneered Denmark’s first listed fund of hedge funds following the listing of the Scandium Absolute Return Fund on the Copenhagen stock exchange on July 1.
Scandium Asset Management has pioneered Denmark’s first listed fund of hedge funds following the listing of the Scandium Absolute Return Fund on the Copenhagen stock exchange on July 1.
The strategy was first launched in 2002 as the Cayman-domiciled Scandium Fund and the Scandium Absolute Return Fund was established as a Danish-domiciled and regulated clone fund last November. The two vehicles have a combined USD70m in assets under management.
The listing of the Scandium Absolute Return Fund coincides with the second anniversary of the introduction of a regulatory regime for hedge funds. However, the market remains limited and Scandium is the only Danish fund of funds not managed by a bank.
While Nordea Bank and Danske Bank also manage funds of funds, says Scandium founder Casper Hallas, their funds invest in the banks’ own hedge fund products, whereas Scandium carries out its manager selection among the global universe of funds.
After working in UK and Sweden with Nordea and Neonet, Hallas created the Scandium Fund in 2002 with his own savings plus some allocations from friends and family. He achieved a 7 per cent return in the first year at a time when global stocks were suffering a 24 per cent slump.
Three years later Hallas obtained authorisation from the Danish financial regulator to establish Scandium Invest (now Scandium Asset Management) in Copenhagen and another portfolio manager, Johan Brønnum-Schou joined the new firm as a partner. The two managers own a majority stake in the firm and invest their private wealth in the fund.
Hallas says an increasing number of large private investors, including many who have made their wealth by building up their own business, are approaching Scandium in search of protection against the volatile stock market and interest rates.
‘When you have spent your life creating and nurturing your fortune, you don’t want to take chances,’ Hallas says. ‘The private company owners who are approaching Scandium may be the ones to show other private investors the way to alternative investments
Scandium invests in 17 hand-picked hedge funds with a preference for funds with less than USD2bn under management. ‘We recently conducted research on the Scandinavian hedge fund market and confirmed that privately-owned management companies produce better hedge funds,’ he says. ‘The risk adjusted return is higher when the manager owns more than 50 per cent of the company. And if he owns more than 75 per cent, results are even better.
Hallas believes Denmark has an opportunity to become a much larger hedge fund market. ‘There is a lot of entrepreneurial spirit to be found in Copenhagen and I have been approached by several promising managers interested in founding hedge funds with new and exciting strategies,’ he says.
With the listing on the Copenhagen Stock Exchange Scandium continues to have monthly liquidity. ‘With the USD70m we manage now, there is still a lot of capacity before the fund reaches its assets limit, but there is a lot to be said for growing at the right pace,’ Hallas says.
Investors may already be turned down this year, if the fund is deemed to grow too fast. ‘Fortunately, we have not had to refuse new investors,’ he says, ‘but we are experiencing a large degree of interest and portfolio expansion requires time and reflection.’
