Fixed income strategy
The Fixed Income Strategy's objective is to generate attractive absolute returns by investing in primarily the Scandinavian and European fixed income markets. The value is mainly created through relative/value and convergence strategies. The performance target for the product is the risk free rate + 4%. Risk is limited to 125% of a 10-year Danish government bond measured by Value-at-risk. There are no restrictions on leverage.
The Relative Value strategy's objective is to generate attractive absolute returns by investing in global fixed income markets - primarily in Europe and Northern Europe and create alpha mainly via relative value and convergence strategies. The performance target for the strategy is the risk free rate + 6-8%. The risk limit is defined as 3% VaR measured at a 95% risk level (weekly).
The Absolute strategy is a fundamental bottom-up equity hedge strategy which pursues a thematic investment style. We believe that structural changes persist through economic cycles and reshape industries over the longer term. The performance target is risk free rate +6-8% with a beta range of -0.4 to 0.4 and with a gross exposure below 200%.
Investment themes help us to filter out the companies that are best placed to benefit from the structural changes. We believe these companies will be winners through superior growth in assets and cash flows. They can re-invest strong cash flow at high returns and sustain superior cash flows over the long term, which we have found to be a consistent driver of equity market performance.
Typically, we hold 30 to 40 each long and short stock ideas in the portfolio. We change their weights in the portfolio or even replace them by new stocks when we find the risk to return is no longer attractive.
The Dynamic strategy is a European equity long/short hedge strategy with a fundamental bottom-up investment process. The strategy has an absolute return focus aimed at generating uncorrelated returns through market-neutrality over time. The performance target is the risk free rate plus 4-8% p.a. and volatility is expected to be within the 4-6% range with a beta close to zero. Since inception the strategy has lived up to these targets.
To achieve a high quality of the input to our investment process and staying close to the companies we invest in, the portfolio is concentrated into 30 strategies on average. The gross exposure is expected to be within the 160-190% range, while the limits for net exposure is +/- 20%. Long positions are restricted to 8% of NAV and short positions are scaled to a maximum of 5%. With both external and internal controlling bodies, risk management is at the forefront of our priorities, and our tailormade-hedging ensures intelligent hedging by substrategy to lower overall risks further.
The Dynamic Plus strategy is a leveraged version of the Dynamic strategy, the performance target is the risk free rate plus 8-15% p.a. and volatility is expected to be within the 8-12% range with a beta close to zero.
To achieve a high quality of the input to our investment process and staying close to the companies we invest in, the portfolio is concentrated into 35 strategies on average. The gross exposure is expected to be within the 320-380% range.