In this chapter of our ongoing series of Deal Spotlights, we hear from Chris Menzies from the Svelland Global Trading Fund, as we unpack their experience and their offering on the Propel(x) platform. We came up with ten questions for Chris, and he was kind enough to share his knowledge and experience with us. Read on to digest his insights:
When did the fund first open to investors?
The Svelland Global Trading Fund launched with internal capital in August 2017 and was open to investors from the date of inception.
How much was the initial raise when the Fund started?
The fund was launched with internal capital. We have built the business up organically with assets as at December 2022 being approximately $150 million.
What is your typical investment from individual investors?
The typical investment into the Fund from individual investors is $3 million per investor.
What is your current minimum investment amount?
The minimum investment into the Fund from individual investors is $3 million per investor. However, through a special arrangement with Propel(x), qualified purchasers may participate in the Fund at a minimum investment of $25,000 through a Special Purpose Vehicle managed by Planck Fund Management Corporation, a wholly owned subsidiary of Propel(x).
Have you changed your investment strategy in 2022 compared to prior years, and if so, how?
2022 has been more of a “trading year” for Svelland. We have been more active in the futures markets than equities. We have really used to our advantage our toolbox of financial instruments such as commodity futures, commodity related equities, and freight futures. We have embraced market volatility and seized opportunities when they presented themselves.
Opportunities in previous years lent themselves more to a “buy and hold” strategy given the pricing of some of the equities, so our portfolio structure was stronger in equities than futures. However, the reverse has been true in 2022. But what hasn’t changed is the need for us to fully understand the supply and demand dynamics of the physical commodity market before entering a trade.
Please give us your thoughts of the commodity markets and returns since Fund inception
It is important to contextualize the current state of the commodity markets. The bull cycle of the early 2000s was driven by China demand. The situation we are in now is leading to price volatility and the spike in some markets is a result of a supply side crunch. For almost the past decade, the commodity markets have been under-invested, particularly in metals, energy, and shipping. The market’s strong push into Environmental, Social, and Governance (ESG) initiatives has diverted billions of dollars to renewable energy technology. But the market is demonstrating that renewables cannot yet fully meet the world’s energy demands, evidenced by chronic supply side shortages. It is worth remembering that the energy markets in Europe spiked even before the tragic war in Ukraine, which has exacerbated energy supply issues.
With the above in mind, returns in the early stage of the Fund came mainly from picking up deep value equity positions in sectors such as Liquefied Natural Gas (LNG) shipping equities. Back in 2017 early in the life of the Fund, we were firm in our belief that an energy transition was coming, and that natural gas would have a major role to play in the green shift as a steppingstone to renewables. We were also active in trading the oil and shipping markets.
As the energy transition has developed and our Assets Under Management (AUM) have increased, the portfolio has become more diverse and we have been playing themes such as plastics recycling, batteries, and offshore wind renewable energy. However, underpinning this broadening of scope is our continued active presence in the LNG, tanker, dry shipping, and metal markets.
As mentioned above, 2022 has been a trading year. We have been actively trading the oil markets and tankers, metals, and equity indices. Going forward, we believe copper is a huge opportunity and the shipping markets, in particular LNG and tankers, are well positioned to provide potentially exciting opportunities.
Please outline some key points describing the investing strategy of the Fund
The Fund follows a fundamental, absolute return trading strategy focused on commodity investing. The Fund’s investment objective aims to deliver superior net returns to investors in all market conditions with low or negative correlation to listed equity and fixed income markets. The team leverages their long experience in commodities to benefit from observed structural tailwinds driving value in the sector. These include a challenging transition to a renewable energy future and managing geopolitical shocks and risks in the pursuit of energy interdependence. The Fund seeks to add alpha through deep fundamental research, our extensive network of commodity and freight market intelligence, and sophisticated risk management strategies in the commodities sector.
Please provide a brief description of what you believe makes Svelland Global Trading Fund different from other hedge funds
The Svelland team brings a profound knowledge of commodity supply chains. The investment strategy expresses asymmetric risk positions across commodity futures, freight derivatives, and commodity-related equities. The broad mandate of the Fund allows the team flexibility in strategy, be it directional, relative value, or utilizing options where appropriate.
We do not favor one instrument over another. We are nimble traders and deploy a toolbox of financial instruments, enabling us to generate alpha and manage risk to the best of our ability. The team has a rare ability to translate a granular understanding of physical commodities and shipping market fundamentals into what we believe are high conviction investments in related financial markets. Each discretionary idea generated by the investment team is based on decades of experience, interpretation of the physical and financial markets, trends of the broader macro fundamental environment, and comprehensive risk assessment.
We strongly believe the freight part of our strategy adds diversification compared to other hedge funds. We use the freight markets to attempt to generate alpha through direct trades such as freight futures and shipping related equities. It is also a powerful tool for generation of ideas and identification of potential opportunities by revealing early signals in the physical shipping markets before corresponding moves in the related commodity and equity markets, i.e. it is a leading indicator.
Our Founder and Chief Investment Officer Tor Svelland has extensive experience and connections in the industry dating back to a career in shipping that started in 1989 in Norway and extends to running Trafigura’s dry cargo business in Geneva. The team has a solid handle on cargo movements around the globe. We are very familiar with the ports where cargo is loaded, and we know the cargo vessels. Such information is not easily obtained without important connections to the right partners in the industry. At Svelland, we have these links to ship owners, operators, and brokers.
Tor has over 33 years of experience trading in the shipping, commodity, and equity markets. He is ably supported by two portfolio managers, Andreas Mattsson and Ara Levonian. Andreas has over 25 years of experience trading oil derivatives and Ara has traded the markets at companies such as hedge fund GLC. They both have extensive experience in the markets and provide highly useful support to Tor in managing the portfolio.
Please tell us about any significant past achievements such as hitting growth milestones, important funding rounds, etc.
- The Fund has successfully passed the 5-year track record mark.
- Our AUM grew beyond the $100 million threshold.
- We were delighted to be ranked by respected industry analyst Barclay Hedge as the second-best Macro Hedge Fund in the world for the three years to Q2 2022.
- We continue to focus on pursuing uncorrelated, positive returns for our investors and growing our assets.
Please tell us about any significant future plans you have that could be of interest to potential investors
In the event our AUM grows to over $300 million, we will likely add a metals trader to our team. We are already in dialogue with someone we know well, who has a long background in trading the metals markets at a commodity trading house. The trader is based in Hong Kong, speaks the local language, and has a deep understanding of the Chinese metal markets. We believe this would add great depth to our team and could open up new opportunities for the Fund.
We thank Chris for taking the time to share his experience, knowledge, and insight of the commodities market and the Svelland Global Trading Fund. If you are interested in finding out more about the Fund and building your portfolio with alternative investments, please feel free to visit the Propel(x) platform.
This article is not an offer to sell or the solicitation of an offer to buy any security, which only can be made through official offering documents that contain important information about risks, fees and expenses. This article is for informational purposes only. We do not provide legal, financial, or tax advice and investors should consult their advisors prior to making any investment. As with any investment, past performance is no guarantee of future performance, and any investment decision must balance the risk against the potential return. Private investments are highly illiquid and risky and are not suitable for all investors. There is no guarantee that a liquidity event will ever take place. Even if a liquidity event takes place there is no guarantee that the investor will earn a return. Private placements are high-risk and there is a risk that an investor could lose their entire investment.
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The SGTF offering is done through an SPV managed by Planck Fund Management Corporation, a wholly owned subsidiary of Propel(x). The SGTF offering is only available to qualified purchasers. Propel(x) itself is not a registered broker-dealer.
As part of an investor’s due diligence when considering investing in the SGTF, investors must carefully review the prospectus and offering materials and consult with advisors before making an investment. Investors should consider the issuer specific risks report included within the offer documents. It is important to note that an investment in a hedge fund bears the risk of partial or complete loss of capital. There is no guarantee that an investment will be profitable or that the investment strategy will be successful. An investment in a hedge fund involves a very high degree of business and financial risk that can result in substantial losses. Investing in a hedge fund therefore requires high risk tolerance, low liquidity concerns, and long-term commitments. Investors must be able to afford to lose their entire investment. An investment in a hedge fund is not Federal Deposit Insurance Corporation (FDIC) insured. Specific risks to consider include Commodities Risk, Compulsory Redemption Risk, Concentration Risk, Currency Exposure, Derivatives Risk, Forward Freight Agreements Risk, Options Risk, and various others as listed in the issuer specific risks report.
* The term “award-winning” refers to the Svelland Global Trading Fund being ranked by respected industry analyst Barclay Hedge as the second-best Macro Hedge Fund in the world for the three years to Q2 2022, and being short-listed for the HFM European Performance Awards 2022