It is a long and never-ending race

The race

Finance is my passion and I am fortunate to have it as my profession. Even after some 25 years in the industry, investing money still is the most exciting thing I can think of doing as a profession.

In order to succeed in investing, one needs to have an edge. Whatever your edge is, it is always under threat and it only lasts for a moment in time.

This is because any advantage acquired by an edge will attract competition fast. After your edge becomes common knowledge there is no profit to be made anymore and actually neither is there an edge.

The race in the late 1990s

During my career, I have seen my first special skill as a sales trader become worthless as computers and algorithms replaced humans in this function.

I will illustrate the skill I had in this example:

Buy these 32 different stocks in these European markets “over the day, max 1/3 of volume, with  volume-weighted average price target (VWAP), happy to own -6% from yesterday’s close“

Today you can automate this trade command on a computer before the market opens and it will perform the whole procedure.

It was clear already in the mid-’90s that automation will replace humans in many functions. However, there were many years to earn profits with this edge, before new competition crowded this specific race. Now sales traders have lost their jobs to algorithms.

My master’s thesis from the Swedish School of economics from 1996

The race in the new millennium 2000s

The next track where there was room to make profits was securities analysis. Instead of just looking at stocks and bonds, I looked into all investable objects in parallel and compared their risk and return characteristics.

Together with my first HCP crewmate and co-founder  Jarno Lämsä we built two programs named Sijoitusmoottori (Finnish for investment engine) in 2009. We were partly financed by “TEKES” funding from the Ministry of Economic Affairs.

The idea we developed is still at the very core of my investment strategy in the HCP Black fund. For the first eight years, HCP got its bread and butter from this specific style of investing before expanding to parallel races within the field of investing.

The race in the 2010s

There is no slowing down on research and development when one aims to hold an edge.

Our team did some burdensome manual analysis of corporations in the early 2010s that was almost undoable as it was so human resource-intensive. Today the same study can be done by a computer and database. As in the late ’90s sales traders lost their edge to algorithms, now computers and databases have replaced humans in this calculus.

In our HCP Focus fund, we started using one specific database to replace manual analysis in 2015. Using this tool instead of manual analysis is the most important source of Focus fund’s alpha ever since. For the last five years, we have gotten our bread, butter and even some cheese from this specific investment analysis.

So what competitive sport is this really?

Finance as a sport might sound unfair as any practitioner can expect their skillsets to be cannibalized sooner or later. But the never-ending race goes on and professionals will continue to look for new tracks to make profits in.

The understanding and knowledge acquired by holding a certain edge in the past are not for nothing though. Only due to my work on artificial intelligence (AI) in the mid 90’s I have developed a mature understanding of what computers can do in finance. This expertise allows me to currently have 26 % of assets invested in trend-following strategies in the HCP Black fund, which is partially based on machine learning.

Also, the expertise that our team acquired by doing a burdensome analysis of corporations manually, made it possible for us to evaluate different databases on their accuracy. We had high-quality benchmarks of the calculus done by ourselves to compare the computer calculus with. This allowed us to make a well-informed decision when choosing the database used in the Focus fund.

We live with the well-known market wisdom “Enjoy as long as it lasts – it never does” and work on research and development constantly. That is the way to constantly have the edge as a team. What all we are working on right now, I will tell you later, and it is that way for a reason.

Just yesterday we published our research on “risk parity” which type of investments we are not currently involved with for a reason.

Security from the “Stay-at-home” Economy during the Corona Panic

Stock markets have met a shock. This time the hit came from outside of the economic realm in the shape of the coronavirus. The world economy has suddenly stopped with countries closing their borders and people quarantining in their homes. The beginning of the year’s returns have melted off in markets at a pace not seen since the financial crisis.

The sudden braking in markets has to be understood, as the world economy has been on artificial life support through various massive stimulus measures. When the world economy suddenly stops, all ingredients for a deep dive are there. Several countries’ economies will fall into a recession, and the probability of a depression is high. The longer the situation lasts, the more lasting will be the damage done to the economy.

Central banks across the world have been supporting slowing world economies with ever increasing stimulus. In the United States, the Federal Reserve reduced rates to zero and presented a 700-billion dollar stimulus package. The European Central Bank in turn will begin emergency funding to the tune of 750 billion euros. At the same time, Lagarde moved the Eurozone from “whatever it takes” rhetoric to “there are no limits.” Too bad that none of these measures will cure the coronavirus pandemic but only moderate its side effects in the economy.

In a severe bear market, all stocks are sold off. Only a little bit later, when there has been time to analyze the situation better, is the wheat separated from the chaff. The coronavirus affects companies in different ways. Airline companies and other companies related to tourism and transportation have naturally been the objects of panic selling.

The corona epidemic does not seem to be a short-term problem, but according to the latest information the situation will last for months. In the worst scenario, if the virus mutates, it will keep spreading across the globe for years. With people’s mobility being restricted and with them spending time at home in increasing amounts, the types of services people use will change.

In my opinion Jim Cramer came up with a good term for this kind of economy by calling it the “stay-at-home” economy. Cramer brought up 20 companies in Mad Money, which are good picks in such a situation. In a “stay-at-home” economy people avoid contact with other people and use products that can be accessed directly from home. In a “stay-at-home” economy, people use more time on social media than usually, using different entertainment services, and favor ordering products online rather than visiting brick-and-mortar stores.

Out of Cramer’s picks, five companies can be found in the HCP Focus fund’s portfolio: Facebook, Amazon, Shopify, Nvidia, and Etsy. They constitute almost half of the entire fund. In addition to these, Focus has other companies whose services the “stay-at-home” economy could generate demand for. Grubhub delivers restaurants food directly to the consumer’s door, and Baidu will serve as China’s search engine as previously. Therefore a major share of HCP Focus’s investments can be considered “stay-at-home” companies. Despite share prices falling majorly, HCP Focus has not come down as much as the benchmark index or the market globally, even though the fund is extremely concentrated. Companies benefiting from the “stay-at-home” economy have given the fund security during the worst corona panic.

The coronavirus will pass with time, and humanity will survive this as well. Consumers who have been happy with at-home services will likely continue using them. As a result of these, HCP Focus too could emerge stronger than before from the coronavirus pit.

Let’s wash our hands and take care of each other!

Pasi Havia
HCP Focus portfolio manager

You can subscribe to HCP’s newsletter here. If you want to read only the HCP Focus fund’s updates, you can subscribe here.

(This text is a translation of an original Finnish-language text by Pasi Havia.)

HCP Quant 2/2020 -7.39% | From the coronavirus into a recession? | Premier Oil Update

As I am writing this, the world looks to have suddenly sunken into uncertainty as deep as was experienced in the financial crisis. In Italy, the market declined over 11% in a day, in Australia over 7%, in Japan over 5%, in France over 8%, and Europe’s Euro STOXX 50 declined by 8.45%. In the United States, the S&P 500 index dropped 7.60%. Quite some declines!

At the time of the previous investor letter, the coronavirus worries primarily concerned Asia. Now the problems have spread to other continents as well. The highly priced US S&P 500 Total Return index lost 7.54% in euros in February. From these valuation levels, there is still a long way down. The S&P Europe 350 Total Return index fell by 8.57% over the month. HCP Quant’s benchmark index MSCI ACWI SMID Value Total Return lost a total of 9.39%. HCP Quant declined by “only” 7.39%, which is hardly comforting, even though it is clearly less than the benchmark index. That’s how rough February was, and March does not look any easier.


As I see it, the coronavirus has the potential to push the world economy into a new recession, even a depression. Actually at least a short-term recession looks at this moment almost inevitable. In the modern world, supply chains are noticeably longer and more complicated than even a decade ago. Sturdy measures against the coronavirus disrupt these supply chains. Even though companies’ order books look full, the situation can be such that ordered products could not be produced or delivered. The most immediate effects have been seen in industries with direct connections to people’s mobility, such as airlines and tourism in its various forms.

The longer the situation lasts, the more difficult it is in an economic sense to clear the crisis. The virus quite justifiably scares people. With the uncertainty being high, people delay large purchases, such as buying cars or apartments. When consumers’ trust decreases, the economic machine slows down as well.

Part of companies have enough inventory, on the basis of which to keep production up, but with the situation going on problems will spread to these companies as well. Before long, problems will rise in the real world as well. A café owner in Milan can hardly keep the café running for months without customers or a technology company produce smartphones, if it does not get all the necessary components. Central banks’ tools will not make the coronavirus go away, which makes the situation troublesome for the real economy. According to the EU Chamber of Commerce’s report over 90% of European companies operating in China have announced that their business will suffer already significantly.

Despite worrying news, an investor should not despair. One should remember that where there are trouble, there are opportunities. A software company telecommuting solutions probably makes good profits, hand-disinfictentant manufacturers are working long, and facial masks are bought up regardless of price.

What about Quant? Because HCP Quant is invested in stocks, it will go down with the rest of the market. The companies in the portfolio are now clearly more cheaply priced than on average, so it is well possible, that the fund weathers the storm with slightly smaller damages. One could assume that a cheaply priced company has less downside than a highly priced “future promise.” Now the turbulence at hand can be a market-changing force, which would make value investing work again. But before that one needs to have the patience to ride the elevator all the way to the ground floor. This luckily happens much faster than climbing the market stairs up.


The HCP Quant fund has on Friday sold off, as mentioned in the previous investor letter, its investment in Premier Oil. Russia on Friday decided to break with OPEC, and that decision was followed by Saudi Arabia’s decision to cut the price of crude oil. The price cut is the biggest in 20 years. As a consequence of this, the price of crude oil fell about 30%. Premier Oil fell on Monday by over 57%. Friday’s sale was based on the stop-loss and one could say, that this time the sale was timed successfully before a historically large drop in the price of oil.


Finally a reminder of the approaching subscription day. We are open to new investment all of March. In the currently unstable situation I would like to encourage you to familiarize yourself with the HCP Black fund. If you feel that stocks are too risky right now, and fixed-income has no returns to expect, then perhaps an investment strategy like that of HCP Black could offer some safety. The fund is invested very defensively. A subscription can be done the familiar way by clicking the button below. Please remember that the subscription sum must be seen in the bank account on Tuesday March 31st by 4 p.m. at the latest.

Book a virtual meeting Make a subscription

Regards,
Pasi Havia
HCP Quant portfolio manager

“This too shall pass.”
– Persian saying

(This is a translation of the Finnish-language HCP Quant investor letter.)

By recruiting stars your team can be the whole universe

Say hello to HCP’s Analyst/Institutional Sales Anthony Simola

Quite exactly a year ago, I met Anthony Simola, who was looking for his first job in finance. He had seen me speak at Sijoitus Summit in 2016 and some three years later he announced that he wishes to work with us in analyzing stocks. He had been investing money for some years and his strategy was well-documented since day one. What was there not to like.

I soon learned that this confident young man is not lacking in identity nor maturity. He also had the most critical characteristic that we treasure. That being integrity. My own findings got backed up by a letter of recommendation from Columbia University.

Anthony Simola at the Cable Factory in Helsinki

As with any profession, the practitioner becomes very fast in evaluating a talent. I had a feeling that with Anthony there was plenty. He has gone through education with the best possible track record: IB high school in Finland, then Vanderbilt and Columbia University in New York right after.

There was more, however. Soon I learned that he had written and published a book in 2015 at the age of 22.

Anthony had first studied in depth what thinking actually is and what one can do to enhance it before even considering a specific topic in which to apply it. I had to like his approach!

So, now I knew that I was dealing with a real talent. Anthony demonstrated an understanding of topics and constructs that – even if not being rocket science– was something that could not be explained only by his academic studies.

I asked him to name the very core literature that he builds his understanding on. He replied with a list of 50+ names of authors that he has read in the last few years – all of them classics in mostly Western philosophy, psychology, history, economics, politics, and fiction.

Now my formal reasoning could easily catch up with what my gut feeling had told me. Anthony is remarkably knowledgeable and also dead set on acquiring exceptional skills in investing money. Hiring him was not only an easy decision – it was a no-brainer.

The dream team

“At HCP we get joy from the wide diversity of our team. As the dream team in Star Wars, it is totally impossible to get us marching synchronic, but when the golden robot, young man, and a computer on wheels meet at the same point looking at the same challenge with the same powerful mission to solve it, things do happen as in a pre-choreographed state of trance.”

This is how I described the dream team in a foreword to dear then HCP crewmate Pekka Puustinen’s book Financial Service Logic: In the Revolution of Exchange in Banking and Insurance (2015).

The idea is to have a maximally diversified team so that each and every one can use their specific skill as a superpower for common good. In this group, the normative definition of normal becomes very lax as the standard deviation in different features in our team is big. No one really is the odd one out.

Why should you be only one star if you can be the whole universe

We live by this phrase that a famous conductor once told me. What he meant is that even if you have a special talent you still don’t want to be defined only by this single feature. We want to have a rich life and be so much more!

I’ve had Anthony Simola in our team now for a year. He has worked for institutional sales while further developing his skills in stock analysis. I will make sure Anthony has the best possible mother’s milk to further grow in this business and I look forward to him taking more responsibility at HCP. We will also make sure he will have such a blast working together and alongside with the dream team and the whole #HCPSPIRIT community.

For me, once again as with all of my dear crewmates it is my privilege and pleasure to get to be your jungle guide.

BarclayHedge: HCP Focus is probably the most consistently top-performing equity hedge fund in the world

The Finnish investment fund HCP Focus has been ranked as the 7th best fund in the world in its category (long-only equity hedge funds) by BarclayHedge. 

See: Barclay managed funds report 3Q 19”, page 6).

The Report

The Barclay Managed Funds Report (below: the “Report”) is published quarterly by BarclayHedge, a US-based provider of data on hedge funds and CTA’s. (Please note: BarclayHedge is not affiliated with Barclays Bank). The latest published report is the 3Q 2019 –report, which was published in 10.12.2019.

The Report contains rankings of the 10 best funds across 21 different categories, ranked by their latest 3- or 5 -year returns (depending on the category).

Eligible for inclusion in the Report are hedge funds meeting the minimum criteria for track-record (at least 3 years) and size (AUM at least 10 $M).

A total of 4.536 funds were eligible for inclusion in the most recently published Report, which means that the bulk of all the hedge funds of the world are represented.

The HCP Focus fund (below: the “Fund”) is a global, long-only equity hedge fund managed by the Finnish fund management company Helsinki Capital Partners (below: “HCP”).

In the Report, the HCP Focus fund is listed in the category “Equity Long Only”. This category consisted of a total of 376 funds.

Performance and ranking

During the 3 –year evaluation period 1.10.2016 – 30.9.2019 the Fund had an average annual return of 17,21 %. Consequently, the total return for the period was 60 %.

The Fund is currently ranked number 7 out of 376, which means that it has performed better than 98 % of its competitors.

A consistent top performer

The HCP Focus fund was launched on 30.11.2012. Consequently, the Fund has been eligible for listing since 1Q 2016. The latest published Report to date is the 3Q 2019 Report. Consequently, the Fund has so far been eligible for listing a total of 15 times.

During the period 1.1.2016 – 30.6.2019, the HCP Focus fund made it to the “Equity Long Only” Top-10 -list as follows:

  • 1Q 2016 – rank: 8
  • 2Q 2016 – rank: 4
  • 3Q 2016 – rank: 5
  • 4Q 2016 – (not in Top-10)
  • 1Q 2017 – rank: 7
  • 2Q 2017 – rank: 5
  • 3Q 2017 – rank: 7
  • 4Q 2017 – rank: 8
  • 1Q 2018 – (not in Top-10)
  • 2Q 2018 – rank: 5
  • 3Q 2018 – rank: 3
  • 4Q 2018 – (not in Top-10)
  • 1Q 2019 – rank: 1
  • 2Q 2019 – rank: 3
  • 3Q 2019 – rank: 7

During this 15 quarter period, the HCP Focus fund made it to the Top-10 -list a total of 12 times. No other fund managed to make it to the Top-10 -list this many times!

HCP Focus rankings Barclay managed funds report 3Q 19

HCP Focus vs competitors

Other interesting statistics about the BarclayHedge “Equity Long Only” Top-10 -list. During the 15 quarter period 1.1.2016 – 30.9.2019:

  • a total of 60 funds made it to the Top-10 –list at least once.
  • approximately half (34/60 funds, or 57 % of the total) of these funds managed to do it more than once.
  • one out of four (15/60 funds, or 25 % of the total) managed to do it more than twice.
  • approximately one out of ten (7/60 funds, or 12 % of the total) managed to do it more than 5 times.
  • only one single fund  – HCP Focus – managed to make the Top-10 -list more than 8 times!

(These statistics are visualized in the attached document: “HCP Focus rankings Barclay managed funds report 3Q 19”.)

All previous Reports can be downloaded here: https://www.barclayhedge.com/rankings-awards/barclay-managed-funds-report/

(Downloading is free but requires registration.)

Fund pages: https://www.hcp.fi/en/hcp-focus/

For more information, please contact Jo Iwasaki (investor relations) at HCP. Contacts: https://www.hcp.fi/en/jo-iwasaki/

The fund accepts subscriptions four times per year. Subscriptions: https://www.hcp.fi/en/fund-subscription/

Recent articles featuring the Fund:

https://www.bloomberg.com/news/articles/2018-10-16/one-of-world-s-top-15-fund-managers-reveals-his-next-top-picks

https://hedgenordic.com/2019/04/unorthodox-value-approach-from-hcp-focus/

https://hedgenordic.com/wp-content/uploads/2019/10/HN_EquityReport_2019.pdf

HCP Quant 1/2020 -5.87% | Coronavirus Slaughters January Rally | Premier Oil PLC

January began on a positive note in the stock market, but it concluded completely differently as the coronavirus scared people across the globe. HCP Quant lost 5.87% of its value in January and the benchmark index MSCI ACWI SMID Value Total Return lost 2.46% in euros. The S&P 500 Total Return index seems to be independent of the real world and rose 1.28% in euros. Europe’s S&P Europe 350 Total Return index in turn decreased by 1.26%.

HCP Quant and its benchmark index in January 2020.

HCP Quant developed favorably before worries about the coronavirus arose. United States’ trade truce with China gave some tailwinds, as did the traditional small-cap January rally in the market. HCP Quant outperformed its benchmark until bad news about the virus began spreading like wildfire. I wonder if it is the irony of fate or something else that Chinese stocks keep getting hammered time after time.

The coronavirus spreading from Wuhan in China closed the bourse for a longer period than usually. The market closed to celebrate Chinese New Year on January 23rd but did not open again until February 3rd. Before opening, the People’s Bank of China marched to the rescue by reducing interest rates, increasing liquidity, and setting trading restrictions. Despite these measures, for example China’s CSI 300 index lost 9.45% in euros compared with its previous close and the Shenzhen Small & Medium Enterprises index lost 10.18%. Without the state’s measures, the situation would have been even more desperate.

Now in February, the situation shows signs of calming, and stock prices have indeed risen moderately.


In January, we found out that one of HCP Quant’s investments is in a special situation. Premier Oil PLC announced on January 7th about restructuring its debt. This made the stock price shoot up by over 16%. The gain’s background is in an unusual short squeeze situation. Asia Research & Capital Management (ARCM) is one of the company’s biggest short-sellers. What makes the situation interesting is that they also own Premier Oil’s debt. That is not all. They have been very quiet about having a large short position in the company. ARCM as a creditor opposes the debt restructuring, which strongly indicates that their interest is primarily pushing the company’s stock price down.

On January 16th, Premier Oil announced that they have their creditors’ support as well as a court’s acceptance for the restructuring. Outraged by this, ARCM created a website, arcm-premieroilscheme. After this, worries about the coronavirus spread to the market, as a consequence of which oil prices fell down strongly. Premier Oil’s stock price followed the fall. The stock price has fallen to a level below that of the time of the announcement on January 7th. ARCM tries to put obstacles in the company’s way as fast as it can. If the oil price recovers and ARCM is the underdog, there could be another short squeeze. The world crisis helps ARCM’s goals right now. The world seems to be stormier than usual. An investor should keep his head cool and not overreact. If recent events make you feel uncomfortable in the stomach, it is a sign of too high a level of risk exposure. Then decreasing risk is justified. If not, it is better to focus on one’s investing and stay away from unnecessary flittering.

Easy does it.

Book a virtual meeting Make a subscription

Regards,
Pasi Havia
HCP Quant portfolio manager

“There is danger in everything we do.”
Laura Huxley

(This text is a translation of the Finnish-language HCP Quant investor letter.)

The Nordic KPI – How much does your company contribute to society in euros?

What did your company do for the world last year, and how big part of your business does it correspond?

We measure our impact on workers, clients, communities, and the environment. As a B Corporation, we do this using the B Impact Assessment (BIA), which the independent certification body checks.

To us, the BIA is the best toolbox for measuring if a company is causing more good than harm. It asks the real questions, such as: if the company shares all financial information with its full-time employees; how many times more the highest-paid worker receives compared to the lowest-paid full-time worker; what % of the company is owned by workers and management?

The BIA would catch any company just trying to make their business look nice.

As with everything there is always room for further research and development. We were first B certified three years ago and currently going through reassessment. One thing that we noticed – back then and now – is that BIA recognizes payments for charity but not as much the payments for tax and social costs.

These payments deserve a closer look as they contribute to the wellbeing of society greatly. Why not be transparent about it? In our Sustainability Report 2018, we published for the first time the size of the tax and social security payment in relation to revenue in one simple chart (see below).

HCP – Nordic KPI (v1.0)

In our Sustainability Report 2018, we published for the first time where our cash goes.

This year we have hired two trainees to further study this topic. Sofia Nelson will draft our annual Sustainability Report, where we look at our impact on all stakeholders. Maj Lundström will study Finnish and Nordic companies in comparison to their global competition to find out how much they contribute to society in proportion to their revenue. This simple ratio we named the Nordic Key Performance Indicator (v1.0).

Now let’s go back to the question where we started: “What did your company do for the world last year, and how big part of your business does it correspond?” Out of our €1.433.363 revenue, we contributed 22 %, meaning a total of €313.076 to the society. Our Nordic KPI (v1.0) was 22%.

So, what is your Nordic KPI?

HCP Quant 12/2019 +2.23% | The Year 2019

In December, the United States and China reached a preliminary agreement on trade. Nothing has been signed so far, but the additional tariffs on Chinese goods threatened by Trump were cancelled and the formerly imposed tariffs have been promised to wind down gradually. Knowing Trump’s unpredictability, a positive outcome in the trade war was a relief for markets. Especially for Chinese stocks. The episode is likely far from over and additional drama is likely to follow this year.

As a result of the good news in December, the month was favorable to stocks. The HCP Quant fund rose 2.23% aided by the news of the trade deal. The benchmark index MSCI ACWI SMID VALUE Total Return gained 1.96% in euros, which is explained by its high US weighting. In the US, the S&P 500 Total Return index rose by 1.06% in euros, and Europe’s S&P Europe 350 Total Return index gained 2.07%.

In July’s investor letter, I wrote about The Scottish Salmon Company, which had received a buyout offer. The HCP Quant fund approved the offer and the Norwegian kronas were deposited to the fund’s account in December. This buyout has been concluded for the fund.

The HCP Quant fund’s and its benchmark index’s returns in 2019.

The year 2019 was not a good one for HCP Quant. When it comes to markets, the year 2019 was a repeat of 2018 in the sense that large companies outperformed small companies, and value companies again lagged behind growth companies. US markets were still amazingly strong. Valuation levels are high across the pond and using the cyclically adjusted price-to-earnings ratio, the expected returns are very low. For now, markets do not seem to care about this.

The above graph shows HCP Quant’s development compared with its benchmark index year to year. The year started gleefully with the fund outperforming its benchmark index for approximately the first four months. This was followed by an escalation of the trade war with China, which pushed stocks down. In May, HCP Quant dropped 11.59%. Since touching bottom, the rebound starting in the beginning of June was stronger than that of the benchmark index. But in August, the markets fell again before the fund had caught up with the benchmark index. August’s drop was almost as bad as the one in May, 10.98%. The reasons were identical. Since the new bottom 9.10. the development has been better than the benchmark index.

HCP Quant has swung upwards and downwards more markedly than its benchmark index. The fund’s portfolio is concentrated, so this is its defining characteristic. The drops in May and August were so notable and fast, that they triggered stop-losses in many positions, realizing losses. Situations in which stocks come down across the spectrum are not the optimal use of a stop-loss, if a strategy attempts to stay maximally invested, which is the case for HCP Quant. When markets come down widely, this does not necessarily mean that there is anything wrong with individual companies. The purpose of stop-losses is to cut off a single company’s losses within the portfolio. When all stocks come down simultaneously, the cash realized from selling a losing company does not immediately held, as the new investment target falls in tandem with other companies. It is still better to realize the chosen strategy simply and systematically than start developing exceptions for bending the rules. These often have an even worse outcome.

There were two buyouts in the portfolio last year. In addition to The Scottish Salmon Company, Acacia Mining was bought out by Barrick Gold in an all-share deal. This was an interesting case. Barrick Gold is a large-cap company. Its market capitalization is some tens of billions of dollars. In the share exchange, HCP Quant received a company’s shares that it could not own as they did not fulfil the investment criteria. Barrick Gold is not a small or mid-sized company, and neither is it sufficiently undervalued. Therefore HCP Quant was forced to sell the Barrick Gold shares. The shares’ holding period was therefore shorter than usual as a result of this.


HCP Quant will continue with its chosen strategy. By investing concentratedly in small and mid-cap value companies. It has not been the most practical investing strategy. If big growth companies keep appreciating, the coming year looks tough. Return expectations in developing markets, small-cap companies and value companies are better than in a long time. Whether or not a turn occur is a big question mark.

Wishing you success in 2020,
Pasi Havia
HCP Quant portfolio manager

“Struggle is temporary. Sacrifices are like investments. Give up the short-term comfort for the long-term win. Be patient and stay focused.” – Unknown

(This post is a translation of the Finnish-language HCP Quant investor letter.)

B Corps making a splash at Slush

What an afternoon, and what an evening party! 

On Friday 22nd of November, we organized ‘To B or not to B’ seminar to promote B Corporation certification among visitors of Slush –  the leading tech and start-up gathering in the world. 

To B or not to B

We were happy to enlist support from Goodwings, Aliter Networks, Kraft, and Ramborn Cider sharing their B Corp stories. We met entrepreneurs and some larger companies in Finland interested in B Corp and trying out the B Corp impact self-assessment tool.

We became the first Finnish B Corp in 2017. B Corps are known for integrating a positive impact on customers, communities, workers, and the environment through good governance. They are for-profit but with a bigger purpose. The pioneers of B Corps are Ben & Jerry’s and Patagonia, but last month also Burton Snowboarding and the Guardian the media group joined the global movement of over 3,000 companies making a splash.

Now there are a dozen Finnish companies that we know are interested in becoming one. We welcome this because this is a network we trust. We use other B Corps’ products and services because we know the providers to be good. And this, surely the people who came to the after-party at our HQ can testify. 

The B Corp story in Finland has just begun. We want to support the growth of the B Corp community here by organizing monthly B Nights where anyone on their B journey can meet and chat with people with similar ambition. We open up our HQ at Kaapelitehdas as a venue. 

The first B night will be on Wednesday 11 December. We look forward to more B Corps in the Nordics. Who knows, your company may be the next  Patagonias or Ben & Jerry, promoting the idea of balancing purpose with profit.

Christian from Goodwings

Christian Møller-Horst from Goodwings explains how you can save in travel expenses while donating to charities.

Maxime from Lombard & Odier and Tommi from HCP

HCP’s Tommi Kemppainen pulled another B Corp asset manager Maxime Lingjaerde from Lombard & Odier on stage.

Adie from Ramborn Cider

Adie Kaye and Ramborn Cider are working for reviving the culture of cidermaking and replanting traditional meadow orchards throughout Luxemburg.

Steffen from B Corp

Steffen Kallehauge from B Corp walks the audience through B Impact Assesment.

Odette from Aliter

Aliter Networks’ goal is to have half a million IT products reused by 2025, explains Odette van Zijdveld.

Catherine from Kraft

Catherine Stenholm and Kraft Group are making a change in the professional Swedish skin- and haircare distribution segment.

 

HCP Focus is the most consistently top-performing equity hedge fund in the world

The Finnish investment fund HCP Focus has been ranked as the third-best fund in the world in its category (long-only equity hedge funds) by BarclayHedge.

See: Barclay managed funds report 2Q 19, page 6

Barclay Managed Funds Report

The Barclay Managed Funds Report (below: the “Report”) is published quarterly by BarclayHedge, a US-based provider of data on hedge funds and CTA’s. (Please note: BarclayHedge is not affiliated with Barclays Bank). The latest published report is the 2Q 2019 –report, which was published in 3.9.2019.

The Report contains rankings of the 10 best funds across 21 different categories, ranked by their latest 3- or 5 -year returns (depending on the category).

Eligible for inclusion in the Report are hedge funds meeting the minimum criteria for track-record (at least 3 years) and size (AUM at least 10 $M).

A total of 4.710 funds were eligible for inclusion in the most recently published Report, which means that the bulk of all the hedge funds of the world are represented.

The HCP Focus fund (below: the “Fund”) is a global, long-only equity hedge fund managed by the Finnish fund management company Helsinki Capital Partners (below: “HCP”).

In the Report, the HCP Focus fund is listed in the category “Equity Long Only”. This category consisted of a total of 363 funds.

Performance and ranking

During the 3 –year evaluation period 1.7.12016 – 30.6.2019 the Fund had an average annual return of 22,79 %. Consequently, the total return for the period was 85 %.

The Fund is currently ranked number 3 out of 363, which means that it has performed better than 99 % of its competitors.

A consistent top performer

The HCP Focus fund was launched on 30.11.2012. Consequently, the Fund has been eligible for listing since 1Q 2016. The latest published Report to date is the 2Q 2019 Report. Consequently, the Fund has so far been eligible for listing a total of 14 times.

During the period 1.1.2016 – 30.6.2019, the HCP Focus fund made it to the “Equity Long Only” Top-10 -list as follows:

  • 1Q 2016 – rank: 8
  • 2Q 2016 – rank: 4
  • 3Q 2016 – rank: 5
  • 4Q 2016 – (not in Top-10)
  • 1Q 2017 – rank: 7
  • 2Q 2017 – rank: 5
  • 3Q 2017 – rank: 7
  • 4Q 2017 – rank: 8
  • 1Q 2018 – (not in Top-10)
  • 2Q 2018 – rank: 5
  • 3Q 2018 – rank: 3
  • 4Q 2018 – (not in Top-10)
  • 1Q 2019 – rank: 1
  • 2Q 2019 – rank: 3

During this 14 quarter period, the HCP Focus fund made it to the Top-10 -list a total of 11 times. No other fund managed to make it to the Top-10 -list this many times!

HCP Focus vs. competitors

Other interesting statistics about the BarclayHedge “Equity Long Only” Top-10 -list. During the 14 quarter period 1.1.2016 – 30.6.2019:

  • a total of 59 funds made it to the Top-10 –list at least once.
  • less than half (28/59 funds, or 47 % of the total) of these funds managed to do it more than once.
  • less than one out of four (14/59 funds, or 24 % of the total) managed to do it more than twice.
  • approximately one out of ten (7/59 funds, or 12 % of the total) managed to do it more than 5 times.
  • only one single fund  – HCP Focus – managed to make the Top-10 -list more than 8 times!

(These statistics are visualized in the attached document: “HCP Focus rankings Barclay managed funds report 2Q 19”.)

All previous Reports can be downloaded here: https://www.barclayhedge.com/rankings-awards/barclay-managed-funds-report/

(Downloading is free but requires registration.)

For more information, please contact Jo Iwasaki (investor relations) at HCP.

The fund accepts subscriptions four times per year. The next subscription day is 31.12.2019. Subscriptions: https://www.hcp.fi/en/fund-subscription/

Recent articles featuring the Fund:

https://www.bloomberg.com/news/articles/2018-10-16/one-of-world-s-top-15-fund-managers-reveals-his-next-top-picks

https://hedgenordic.com/2019/04/unorthodox-value-approach-from-hcp-focus/