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According to this London-based fund manager, now is not a good time for risky assets, but there are opportunities in uranium, copper, tin, fertilizers and oil.
In the current environment, Agera Capital is positioning itself very cautiously because the risk/return ratio looks unfavourable. Global economic slowdown, consumer pressure, runaway inflation, slowing sales and squeezed margins, and central bankers far behind the curve; all of these factors are potentially a toxic combination for risky assets.
CIO Mathias Wikberg has been leading the investment strategy as a family office since October 2019 and founded Agera Capital, a multi-strategy investment partnership early last year. Previously, he was senior portfolio manager at Cambridge Strategy, a $3 billion systematic hedge fund in London, and portfolio manager at Visor Holding LLP, a $2 billion Asian private equity group. He has also worked at Aviate Global, E2 and Nordea, focusing on emerging market equities.
The founder’s background is managing large mandates in emerging market equities where understanding macroeconomic factors, politics, fund flows and sentiment is essential. Combining the fundamentals of value investing with top-down macroeconomic models delivers superior returns while minimizing drawdowns.
He will present to Webinar Manager Discovery Panel May 3 at 11 a.m. ET.
Global central bankers are no longer friends of the market, he says in his latest investor update seen by Opalesque. Inflation kills all bull markets and it is possible that by fighting inflation, central banks will tighten monetary conditions to the point that we have an economic slowdown. Moreover, the tightening of financial conditions is unfavorable to risky assets. “History doesn’t repeat itself, but it sure does rhyme: our market playbook remembers what happened at the end of 2018, when the market was initially scared of a tightening Federal Reserve then sold off again due to growth issues.”
Agera’s long-bias equity-focused thematic strategy returned +3.70% for the month of March, versus +1.94% for the market, according to Wikberg. “We remain cautious on risky assets due to the slowing global economy, rising geopolitical tensions and soaring inflation as well as tightening credit conditions. Our portfolios continue to be positioned for a highly inflationary environment.”
A asset at risk is any asset that carries a degree of risk. Risky assets generally refer to assets whose prices are highly volatile, such as stocks, commodities, high yield bonds, real estate and currencies.
Favorable secular and cyclical thematic opportunities
Agera Global Opportunities seeks absolute returns by investing globally in stocks with secular or cyclical thematic tailwinds. Capital preservation is key and the strategy aims to minimize drawdown to 10% by seeking asymmetric return opportunities, using quantitative risk models and being agile. During the Covid crash of March 2020, the strategy rose +7.7% shorting banks, airlines and the Nasdaq.
Right now, “we like uranium, copper, tin, fertilizers and oil,” Wikberg told Opalesque. “We believe we are in an early stage bull market. Demand is strong and there is almost no supply response with very long lead times. Our biggest concern for our long call on commodities is a global recession which, of course, would kill demand.
“We’re also long banks in Latin America, benefiting from a strong macro economy, higher rates and better corporate governance. We like a few oversold US tech names with structural tailwinds like cybersecurity.”
Right here, secular refers to market activities that occur over the long term. A secular tailwind is a social or economic trend that impacts the economy as a whole, as well as the businesses that participate in it. A good example of a secular tailwind is the global shift to electronic payments (eg, credit cards and debit cards) away from paper money transactions. This is a long-standing trend that is expected to continue regardless of the strengths or weaknesses of the economy. Companies directly involved in facilitating this trend, such as Visa, will benefit regardless of the strength of the economy.
Agera Global Opportunities is a strategy that uses fundamental stock selection with a thematic overlay to create positions in approximately 20-30 global mid-cap stocks. The strategy has an unconstrained mandate, which gives the manager the ability to seize opportunities, regardless of sector or geography. In addition, he looks for unique early-stage investment themes that have the potential to be medium to long-term growth drivers.
The strategy has annualized returns of 46% from October 2019 to March 2022, with a Sharpe ratio of 2.0 and a maximum drawdown of 10.03%, compared to the ACWI, MSCI’s flagship global equity index, which has annualized 12.6% over the same period after returning 1.9% in March. the HFRI The Equity Hedge Index (Total) rose 0.5% in March.
Next Opalesque webinar:
Manager Discovery Panel: London
Meet five brilliant fund managers and hear their presentations in this interactive webinar.
• Théron de Ris, Eschler Asset Management
• Richard Simons, Derby Street
• Mark Walker, Tollymore Investment Partners
• Christian Putz, ARR Investment Partners
• Mathias Wikberg, Agera Capital
When: Tuesday, May 3, 2022 at 11 a.m. ET
Free registration here: www.opalesque.com/webinar/
28.Feb.2022 Opalesque Exclusive: Agera Capital seeks megatrend opportunities in emerging markets