Press Release from the Nordic Seminar which Alvine Capital did together with Citi on October 5th

London, October 18th, 2011

Alvine Capital makes the case for investing in the Nordic region

At a recent Nordic seminar hosted by Alvine Capital and Citi at Stirling Square, over 100 delegates heard a panel of four Nordic managers making the case for investing in the region.

There are several reasons why the region is a bright spot in an otherwise fairly bleak European investment environment:

  • Strong public finances
  • Strong, stable GDP growth
  • Low unemployment
  • Healthy exports and industrial output
  • Well-capitalised banking sector
  • Exposure to emerging markets
  • World-class global companies

Some of the key selling points for the region are the low public debt numbers, as a percentage of GDP, which range from 45% for Sweden to just over 63% for Norway. This compares to 220% for Japan, 60% for Spain and 143% for Greece. The region also boasts low unemployment and strong GDP growth. In Sweden, for instance, GDP is estimated to grow at 4.4% for 2011.

In terms of competitiveness, three of the four Nordic countries (Denmark, Finland and Sweden) are all in the top 10 in the IMF’s 2011 Global Competitiveness Report. One of the reasons for the high rankings was the ease in which business is conducted in these countries. Other criteria such as transparency, ethical reputation, technological adaptation, productivity and innovation are also listed.

In terms of hedge fund assets Sweden alone accounts for $30bn and in terms of performance, the Nordic Hedge Fund Index has outperformed its international counterparts. Since January 2001 The Nordic Hedge Fund Index has delivered annualised gains of 6.10%, more than double that of the DJ Credit Suisse Tremont Hedge Fund Index (DJ CST HFI), which has annualised at 2.85%. It has done this with almost a third of the volatility: 3.91% for the Nordic Hedge Fund Index versus 9.56% for the DJ CST HFI. Correlation to the S&P 500 is also low, at 0.3 for the Nordic Hedge Fund Index compared to 0.6 for the DJ CST HFI.

Harlan Zimmerman, London-based senior partner at Swedish activist investor Cevian Capital, said: “The openness of the Nordic economies has forced them to remain competitive and their higher-than-the-EU-average exposure to emerging markets is also benefitting the region.”

The Nordic countries have also largely escaped the global banking crisis. Sweden had its bank crisis in the 1990s related to property over-investments and the restructuring that followed ensured less toxic assets in the latest crisis. Zimmerman said the stability of Nordic banks remains higher than the rest of the world. He said: “Stress tests show that the Nordic banks are in the top tier and the highest decile. Swedish banks invested in a more reasonable manner and did not get into all the supposedly sexy stuff”.

On a company and sector level, the Nordic countries have produced some of the world’s leading and most innovative firms.

Ulf Strömsten, fund manager at Catella Capital, said having largely escaped the ‘Euro disease’ the Nordic outlook remains positive. “Apart from good public finances our companies’ debt to equity ratios are also very low.” he said.

Sten Berggren, fund manager of an event-driven hedge fund atSentat Asset Management said that certain sectors, such as the oil sector in Norway, are offering interesting opportunities. He said: “Norwegian oil service companies use their experience to gain access to new markets such as Brazil and Africa, giving them further growth potential. There are plenty of opportunities in the sector and many of the companies are trading below construction value and at the same time have very good cash flow ratios”.

Catella’s Strömsten attributed the performance of Nordic hedge funds to the fact that liquidity is abundant and shorting opportunities are also plentiful.

Morten E. Astrup, CIO and portfolio manager at Storm Capital Management, a London-based hedge fund, said that Norway and the MSCI Emerging market index have similar

volatility and performance. He said: “Investing in Norway gives you an upside of investing in emerging markets but within a regulated environment”.

Astrup said he has been waiting 17 years for stocks in the shipping sector to fall, and has been closing his short positions. Berggren said that he has been buying gold and select gold-mining companies as protection in an environment where the outlook is uncertain and a rebound difficult to predict.

Zimmerman said Cevian only invests in a couple of companies per year. He said: “I am enthusiastic about the new opportunities but also about developing our existing holdings.”

Astrup said he is taking advantage of having longer liquidity terms and taking advantage of forced sellers. He said:”In the high-yield market this can be a fantastic play where we can wait for the redemptions when the daily-liquidity guys have to sell,” he explained.

Managers were also enthusiastic about the real-estate sector.According to Investment Property Databank (IPD) data, the property sector in Sweden gained 9.2% per year from 1997 to 2010. The strong fundamentals have further underpinned increased rental growth and retail sales. This has further boosted interest in the country’s property market and many of the region’s largest institutional investors have been and continue to increase their allocation to property.

Taking all the positive factors into consideration, the Nordic region looks to be a relatively safe haven compared to its European neighbours and developed market peers, and is certainly worth a closer look in these turbulent times.

For further information please contact:

Alvine Capital Tel: +44 (0) 207 529 7690

Thomas Raber, Managing Director

Craig French, Analyst

About Alvine Capital:

Alvine Capital is an independent London-based advisory firm founded in 2005 by Thomas Raber. Alvine focuses on advising clients on both hedge funds and traditional portfolios across different asset classes, markets and investment strategies. Since inception, Alvine has advised clients across Europe on investments in excess of $1.6bn.