Our first ever company community meeting

”Everyone shades on!”

Limited liability companies are sophisticated platforms for different people and resources to work together for a shared goal. They have their roots for soon 700 years.
 
In addition to general meetings for shareholders (yhtiökokous) there is a need to also meet with all the people we work alongside. Therefore, last Thursday 6th of June we organised our first ever ”company community meeting” (or yhtiön yhteisökokous) to meet with all stakeholder groups as they are all important as are the shareholders!
 
This is us. Our identity is shaped by our clients, collaborators, and friends – past, present, and future. Huge thank you to all of you who made it!
 
This is #HCPSPIRIT
 
No one knows how a meeting like this should be structured. What we know is that it must have of all the stakeholder groups and it can not be a closed meeting between top executives and shareholders.
 
”We encourage all companies to find the courage to organize their first company community meeting that has people from all stakeholder groups!”
– CEO Tommi Kemppainen
 

#HCPSPIRIT artist Kuuhullu performs unplugged

CEO Tommi Kemppainen welcomes all HCP community members to his home

Campfire after the sunset

BarclayHedge: HCP Focus är världens bästa aktie-hedgefond

HCP Focus har rankats som världens bästa long-only aktie hedgefond av BarclayHedge

Se: Barclay managed funds report 1Q 19, sidan 6.

Rapporten

Barclay Managed Funds Report (nedan: “Rapporten”) publiceras kvartalsvis av BarclayHedge, ett Amerikanskt konsultbolag som publicerar data om internationella hedge och CTA –fonder. (OBS. BarclayHedge är inte kopplat till Barclays bank.)

Rapporten innehåller ranking-listor på fonder i 21 olika kategorier. I listorna är de 10 bästa fonderna i respektive kategori rankade enligt 3 års avkastning.

Kvalificerade för upptagning i Rapporten är fonder som fyller minimikraven gällande avkastningshistoria (åtminstone 3 år) samt storlek (klientmedel (”AUM”) åtminstone 10 $M).

Totalt 4.634  fonder kvalificerade för upptagning i den senast publicerade Rapporten, vilket betyder att Rapporten täcker merparten av världens hedgefonder.

HCP Focus –fonden (nedan: ”Fonden”) är en global, long-only equity hedge-fond som förvaltas av det Finska fondbolaget Helsinki Capital Partners (nedan: “HCP”). Fonden är en Finsk specialplaceringsfond, vilka enligt internationell taxonomi kategoriseras som hedgefonder.

I Rapporten hittas HCP Focus under kategorin “Equity Long Only”. Enligt den senast publicerade Rapporten (1Q 2019) innehåller denna kategori sammanlagt 338 fonder.

Jämn toppavakastning

HCP Focus –fonden grundades 30.11.2012. Fonden har således varit kvalificerad för listning sedan 1Q 2016 -rapporten. Den senast publicerade Rapporten är 1Q 2019. Fonden har således varit kvalificerad för listning hittills sammanlagt 13 gånger.

Under perioden 1.1.2016 – 31.3.2019 lyckades HCP Focus nå Top-10 enligt följande:

  • 1Q 2016 – rankad: 8
  • 2Q 2016 – rankad: 4
  • 3Q 2016 – rankad: 5
  • 4Q 2016 – (inte bland Top-10)
  • 1Q 2017 – rankad: 7
  • 2Q 2017 – rankad: 5
  • 3Q 2017 – rankad: 7
  • 4Q 2017 – rankad: 8
  • 1Q 2018 – (inte bland Top-10)
  • 2Q 2018 – rankad: 5
  • 3Q 2018 – rankad: 3
  • 4Q 2018 – (inte bland Top-10)
  • 1Q 2019 – rankad: 1

Under denna period bestående av 13 kvartal lyckades HCP Focus nå Top-10 sammanlagt 10 gånger. Ingen annan fond lyckades nå Top-10 -listan lika många gånger!

HCP Focus vs konkurrenter

Annan intressant statistik ur BarclayHedge “Equity Long Only” Top-10 –listan.

Under perioden 1.1.2016 – 31.3.2019:

  • totalt 55 fonder lyckades nå Top-10 –listan åtminstone en gång.
  • under hälften (26/55 fonder, eller 47 %) av dessa fonder lyckades med det mera än en gång.
  • cirka en fjärdedel (14/55 fonder, eller 25,5 %) lyckades med det mera än två gånger.
  • cirka en tiondel (6/55 fonder, eller 10,9 %) lyckades med det mera än 6 gånger.
  • bara en enda fond – HCP Focus – lyckades nå Top-10 -listan mera än 7 gånger!

(Denna statistik finns visualiserad i det bifogade dokumentet: “HCP Focus rankings Barclay managed funds report 1Q 19”.)

Alla Rapporter kan laddas här: https://www.barclayhedge.com/rankings-awards/barclay-managed-funds-report/

(Tjänsten är gratis, men förutsätter registrering)

Fondens hemsida: https://www.hcp.fi/sv/hcp-focus/

Ett urval färska artiklar om Fonden:

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://www.arvopaperi.fi/uutiset/ap/384167df-59d2-4daa-93cb-35064ab1ed46?fbclid=IwAR03NZGeoBz9eD7S_l-XSb2iLKjNnMwb7Mj0KuqMP-VYq6Rc5jipfJBGeMw

https://hedgenordic.com/2019/06/hcp-focus-crowned-as-best-long-only-equity-hf

We analysed Facebook’s sustainability shortcomings and decided to keep investing

WE HAVE invested in Facebook through HCP Focus portfolio since May 2016. In March last year, the ESG rating of Facebook was downgraded from BBB to BB in MSCI ESG database.

ESG ratings evaluate the sustainability of companies based on environmental, social and governance factors. At HCP, the Head of Risk Management screens the ESG scores of the companies included in the HCP Focus portfolio annually and informs the portfolio manager on companies with low ratings. The portfolio manager then analyses the red flagged companies case by case.

After a thorough analysis, the HCP Focus portfolio manager Ernst Grönblom has decided to keep investing in Facebook.

“Social media is still an industry in its infancy and it is still too early to say where it is headed. I decided to keep Facebook in the portfolio because I believe that despite all its serious problems, the net effect of social media is still positive”, Grönblom says.

Grönblom also points out that social media is such a new phenomenon, that investors can still influence the development of the sector through active engagement.

ACCORDING to Grönblom’s analysis, the most severe of the current controversies regarding Facebook is the Cambridge Analytica (CA) data breach. You can read the Facebook ESG analysis here.

In March 2018, New York Times and the Observer revealed Cambridge Analytica had obtained private information of more than 50 million Facebook users without their consent. Allegedly, CA had used this information for ads-targeting, and eventually political campaign micro-targeting during the 2016 U.S. elections.

Although the CA data breach brought attention to serious shortcomings in user privacy, transparency, and self-regulation of Facebook, according to Grönblom, the company has addressed many of the systemic weaknesses swiftly and decisively.

”They have removed several million fake accounts, suspended more than 400 policy violating applications, increased the head-count of employees specializing in safety to over 30 000 people, so the probability of similar scandals happening in the future has significantly reduced.”

For now, it seems like Facebook is taking real action to do better in terms of social sustainability and governance. Professional investors, however, need to watch where the digital network giant is headed.

“It is very important that investors speak openly and take a public stance against the misuse of social media – for example, for propaganda purposes,” HCP’s CEO Tommi Kemppainen emphasizes.

WE PUBLISH our ESG analysis on Facebook not only to show that we are taking controversies regarding Facebook seriously but also to contribute to the debate on ESG standards.

”Professional investors should speak openly about their concerns and publish their conclusions. ESG standards are still developing so the more organizations contribute to the debate, the stronger new standards come out of the process, Kemppainen notes.

We continue screening the ESG ratings of our investments and analysing each low rated companies individually. We also take part in the debate on sustainable investment and revise our stance if needed. You can follow on our findings by reading our blog. You can read Ernst Grönblom’s Facebook ESG analysis here.

HCP Focus Annual Review

HCP Focus ended last year as the best Finnish actively managed stock fund.

As you know, the year 2018 was challenging for all investors. Almost all asset classes including stocks, bonds, real estate, and commodities made losses.

Finnish stocks (the OMX Helsinki Cap return index) returned -4.3% on average. Global stocks (the MSCI ACWI IMI index) returned -5.8% on average.

Out of all 500+ stock funds marketed in Finland only 34 managed to end the year with a positive return. I can to my great delight inform you that HCP Focus was one them. In 2018, the fund returned +1.7%.

Removed from context, the return percentage is naturally not flattering, but considering the circumstances and compared with competitors, the result was at least satisfactory. Additionally, many investors have told me that just avoiding losses feels like a relief.

The Return in the Long Term

HCP Focus has gained well in the long term as well. Over five years, HCP Focus returned slightly less than 14% annually on average, which makes the entire period’s total return approximately 90%. Let it be mentioned for the sake of comparison that in the same period Finnish stocks (the OMX Helsinki Cap return index) returned only about 57%.

If you are interested to find out how Focus has performed in comparison with its competitors, see the attached ranking.

In this list, you can find all stock funds marketed in Finland with at least a five-year track record. The list ranks funds by performance over five years (1.1.2014 – 31.12.2018.)

The list has a total of 461 funds. HCP Focus made it to 9th place. This means that HCP Focus has outperformed 98% of its competitors.

Do you want to buy Finnish?

Another interesting detail: measured by its 5-year return, HCP Focus is the best Finnish active stock fund!

At least in the case that a Finnish stock fund meets both of these criteria:

(1) the fund is owned by a Finnish fund company; and

(2) the fund’s portfolio manager is a Finnish citizen living in Finland

Background: only eight funds have a better five-year return than Focus. Out of these only two were owned by a Finnish fund company (”Danske Invest Rahastoyhtiö Oy”), but one of the funds (”Danske Invest Teknologia Indeksi K”) is a passive fund and another (”Danske Invest Kestävä Arvo Osake K”) is managed by a foreign portfolio-management team.

So if you value active portfolio management and the opportunity to meet your portfolio manager face to face, and if you also want to buy Finnish, you know where to begin!

Best regards,

Your portfolio manager Ernst

Do not hesitate to contact me, if You have questions or comments.

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If you would like to study the theme further, I am attaching the following link (in Finnish) for the fund report archive of Suomen Sijoitustutkimus Oy. The December’s report has all the same information as the Excel table I’ve attached to this text (and much else.)

(This text is a translation of the Finnish-language HCP Focus Annual Review.)

2018: the First Year of Falling Markets

The majority of the world’s stock markets fell during 2018. The value of HCP Black also fell by 3.36%, and there is nothing to celebrate about it.

For comparison, however, let’s take a look at a global stock market index, the MSCI ACWI IMI, which fell nearly 9% in euros. Compared to this, the decline of Black by 3.36 % is relatively small. This means that the fund was fairly immune to the global falling trend. In addition, the volatility of the fund remained at just over four percent, which shows that it succeeded in diversifying the risk. Had the market decline been bigger and sharper than this, it’s probable that the fund’s return would have risen considerably on the plus side. The reason is that HCP Black currently mainly invests in asset classes other than stocks and bonds.

One year of declining market

The figure shows the one-year return on the global stock market on 24/1/2019. Total returns calculated in USD. Source: https://www.msci.com/countries-heat-map

The return of insurance-linked strategies does not depend on economic cycles

Last year, HCP Black’s largest investment with a 35% allocation was in insurance-linked securities, which carry the risk of large-scale natural disasters, typically in annual contracts. The return and risk of this strategy are not dependent on the economic cycles, but on whether major natural disasters occur during the year of the contract.

In typical years, these premiums can generate approximately a 4% annual return. In those years when major natural disasters like hurricanes take place, the insurance strategy generates loss. The years 2017 and 2018 made up the worst two-year period as regards actualized risk. In 2018, we were left with −1.3% with this strategy.

However, our choice of security within this asset class was excellent because some securities that were on offer fell as much as 60%. When investing in such atypical asset classes, it is justifiable to pay for the selection of securities if you don’t intend to spend a lot of time on the process yourself. Because the devil is in the detail. It is this work, for example, that you pay for as a unitholder.

The trend following strategy benefits from trends in financial prices

The second largest allocation in HCP Black, with about 25% of investments, was a strategy called trend following, which aims at benefitting from the market trends of over one hundred different financial prices. In typical years, trend following generates some profit, but last year this investment block made a loss of 2.4%.

If the market fall that began on Jan 26, 2018, continues and accelerates in 2019, this investment is likely to perform well. Trend following is an exceptional investment strategy for the combination of two reasons. Firstly, in a typical year, it generates some profit. Secondly, during stock market crashes, it is justifiable to expect it to generate significant profits because financial crises typically have strong trend-like movement. This investment category is further explained in this review of trends over the last 100 years, for example.

Stocks offer the highest earning potential

HCP Black has invested in stocks through the funds HCP Quant and HCP Focus. I would like to remind you that HCP Black does not pay a management fee, neither fixed nor performance-based, for these investments. Within this allocation, HCP Focus generated a marginal 0.12% profit while HCP Quant made a loss of 2.5%.

Despite the risks, it is justifiable to own stocks. For example, HCP Focus includes companies whose market value after 20 years could be nearer 100-fold than 10-fold compared to their current value. Focus invests in companies that benefit from network effects, such as peer-to-peer lending platforms. Such platforms are now a dime a dozen, but the one that first gains a critical mass of users may grow exponentially.

HCP Quant doesn’t have such exponential growth potential. Quant chooses companies that are so undervalued that they are annually subject to buyouts from the stock exchange at a price higher than the market price. This deep value theme of HCP Quant has been unpopular in the market for nearly a decade, which means that it has not performed well.

However, if western countries face a fate similar to that of Japan, where the size of the workforce decreases due to the aging of the population and where economic growth is revived by increasing the amount of debt, such companies that Quant invests in are the most likely stock market risers.

Real estate investments secure the purchasing power of money

HCP Black’s investments worldwide in real estate and in the Japanese real estate market yielded returns of −0.6% and +0.2%. Real estate as an asset class plays an important role in maintaining the purchasing power of money in the current economic situation. A short, less than a ten-year economic cycle already shows signs of slowing down. Also, a longer 80-year cycle of debt growth seems to have come to an end. In the first quarter of this year, the increase in the size of central bank balance sheets will change into contraction.

The economic history is full of chains of events where an aggressive increase of the amount of money has weakened people’s trust in the ability of money to maintain its purchasing power. This is when retaining the purchasing power has required investments in alternative investments like real estate.

You can read more about different real estate investment themes in my writing Home in Homeland – Real Estate Investments Globally.

The right choice of security is the key also regarding this investment. In my opinion, the best tactic is to buy in a property market that has already crashed (cf. Finland in 1992) in order to maximize the expected return relative to the risk. “The devil is in the detail” is a valid idiom also regarding the real estate market.

Gold, life insurance and currencies

Investments in gold and life insurance aftermarket yielded returns of 0.2% and 0.7% to HCP Black. From currency investments, the US dollar, the Japanese yen and the Swiss franc strengthened. These currencies are classics that have been safe havens in world turmoil. The same is true for gold – especially when the challenge has been about an excessive amount of debt.

The life insurance aftermarkets are not cyclical, and investments in them should not suffer even in a poor economic situation. This is one way of managing risks in 2019.

It should also be noted that the return of 2018 was reduced by one percent by the tail hedge, which is paid-for protection. Under normal circumstances, diversification of investments should be a sufficient tool for a fund’s risk management. However, now that the 80-year debt cycle seems to have come to an end and the risk of a market crash is exceptionally high, I think it’s justified to pay to reduce extreme risk. This has been handled by purchasing rights for a limited period to sell securities at a predetermined price. The value of the rights increases as the prices of the securities fall. As a rough estimate, this hedging can bring a 10% return to the fund in a typical stock market crash, and the return can be even larger if the market crash is bigger and steeper. But the loss is never more than one percent.

HCP Black protects against market fluctuations

For many of our customers, HCP Black functions as a tool for risk diversification. It is an investment whose value is mainly based on prices other than those of stocks and bonds. HCP Group’s own investable recession buffer, which is roughly a million euros when writing this, is also invested in the HCP Black fund.

In this review, there is nothing new to report on the global stock market valuation levels and the historically high over-indebtedness in the world. You can read the background and gain some perspective from my writing How Much is a Lot of Debt?

Looking ahead, HCP Black’s strategy is the best way I know how to invest right now when there’s anxiety about a recession, depression and the end of the long debt cycle. This is why we use the fund ourselves.

During 2018, the over-indebtedness of the world began to unravel, which was reflected in the decreased value of many risky assets. The same development can be expected to continue also in 2019. The world’s central banks are likely to follow the American model and reduce their balance sheets – just as they increased their balance sheets the American way when quantitative easing began with the latest global financial crisis.

As I write this, the market has fallen for a year already, and market volatility has increased. To my best understanding, current events are very similar to the previous debt-driven events in the world.

If two years ago I had guessed the state of the stock market – after a year of America’s quantitative tightening, and when for the first time in the world’s economic history the balance sheets of all central banks are decreasing – I would have guessed the market to have fallen by 50% instead of a few percent. So it is surprising how slowly and unwillingly the market is now pricing current or future events.

As I stated at the beginning of 2018, this is “the beginning of the end of this new era of quantitative easing”.

As for 2019, this quantitative tightening can be expected to continue.

It is especially important to understand the effects of this quantitative tightening.

If you are primarily concerned with maintaining purchasing power, HCP Black is, according to my best understanding, positioned just right. You can always follow my market observations via the @hcpgroup Twitter account.

Investor Return as a Numeric Indicator for Customers

In the times, when portfolio managers are highly criticized for chronically losing their benchmark indexes and European Union is reforming its policies on financial companies’ transparency, the asset management companies should strengthen the relationships with stakeholder groups. Customers are one of the most important stakeholder groups for financial companies and their knowledge about investing is growing. As it grows, they realize that the most important matter for them to know is how much money they will earn from the funds. This is why it is important for financial companies to offer customers more alternatives for estimating the risks and returns from the funds.

Fund Return is a standardized way for asset management companies to show the performance of the funds. It is a geometrical figure, which shows the performance of one currency unit during a measured era. Generally, the figure includes a benchmark index to which the fund return is compared. Below is an example of a Fund Return indicator with its Benchmark Index.

HCP Focus – Historical Performance of the Fund Compared to its Benchmark Index.

 

The purpose of the thesis is to find out whether Finnish asset management companies use Investor Return as an indicator to measure customers’ income in euros. My own assumption was that asset management companies do not use the indicator in any way. In the thesis, I interviewed staff from several asset management companies. All in all five companies agreed to give an interview. Two CEOs, two portfolio managers and one manager of development and growth took part in the research.

The outcome of the interviews was that all the participants were familiar with the idea of Investor Return. One CEO uses the indicator to show the performance of funds customer-specifically. Also, one of the portfolio managers told that in a company he worked before they used the indicator as a part of “superior portfolio report” shown customer-specifically.

None of the companies the interviewees represented were using Investor Return in ads and brochures of their funds. One of the interviewees noted that the indicator would be too complicated for customers to understand. He thought that customers need to know all the useful information on the funds but in a clear and understandable way. Another interviewee said, that he would recommend the indicator only for professional customers who understand the idea and terminology of the matter. Also, one interviewee raised a broader problem of the indicator. He thought, that since the portfolio managers are often compared to benchmark indexes, Investor Return wouldn’t be comparable to any indexes and this why it wouldn’t be a useful tool to compare portfolio managers’ performance.

The most important point of the theories in the thesis is the debate between two different ways of measuring the performance of the funds. Investor Return is a good tool to tell the customer how the average investor performed during an era. However, it’s not the best tool to measure the performance of portfolio managers. Portfolio manager can’t control the asset flow in and out of the fund. This why Fund Return shows the performance of the manager better compared to Investor Return.

Customers’ returns from the funds lag the fund returns globally, which is shown in Morningstar’s Mind the Gap (2017) research. Fund Return indicator is not affected by investors’ timing ability. Then again, Investor Return indicator is. Below is a figure, where one can see the reason for investors losing money also in a well-performing fund. The Fund Return only shows how one currency unit has performed during an era. It doesn’t show how investors in the fund have performed during the same era. This is how Investor Return would show different data in a well-performing fund, in which investors make net losses.

Investor Return

Investors’ net losses in a well-performing fund.

The figure leads to the main points of the conclusions. In my opinion, one of the most important tasks for an asset manager is to counsel the customer in investment decisions. The manager should consider the risks of the investment with the customer for example in a sales negotiation. Investor Return would be a good figure to show the customer to point out the importance of a customer’s timing in the fund. The indicator would be useful when the risks of the funds are discussed. Also, it would give the customer a chance for broad observation of the fund’s performance if the Fund Return is shown to the customers with the Investor Return. The combination of the two indicators would show the performance in a diversified way. A Customer would be able to make more considered investment decisions after seeing, how other customers have performed in the fund.

In addition to the matter that Investor Return would calm customers’ desires to buy and sell when the markets are changing, the indicator shows the reality in the historical performance of funds. Theories of the thesis brought up a question of merging funds. Funds are being merged sometimes as a result for asset management companies needs to arrange and organize the funds. The criticism of the funds’ merging showed that sometimes the companies are willing to hide the past performance of the funds. By showing only the Fund Return indicator this kind of procedure would be possible. If the Investor Return indicator would be shown with a merged fund, it would show the true returns behind the new merged product.

Investor Return is an indicator which shows the average investor’s income in euros. If it were shown for the customer fund-specifically with the Fund Return indicator, it would give a comprehensive picture of the fund’s performance. With the help of an asset manager, the indicator would be easily understood, and it would give precious information to the customer. Also, the indicator could lead to longer-lasting customer relationships for the asset management companies.

My suggestion for Helsinki Capital Partners is that they should use the Investor Return indicator fund-specifically in funds’ ads and brochures. It would also be good to show the indicator fund-specifically in annual reports.

About the Author

”I did my internship at Helsinki Capital Partners in summer 2018. It was an extremely interesting and educating experience. My interest in the financial sector was greatly increased during the summer and I decided to write my thesis for the company. I’m studying my fourth year of International Business in Vaasa University of Applied Sciences. Due to the extended scale of the program, it was relieving to notice my passion for finance.

As I was asking the subject for my thesis from HCP’s CEO, Tommi Kemppainen, he responded before I could even finish my sentence. The title came to be Investor Return as a Numeric Indicator for Stakeholder Group Customers. Tommi noted that a responsible company must take care of its stakeholder groups and especially its customers. The main purpose of the funds is to create good returns on a rational risk for customers, and therefore, Investor Return is one of the most interesting numerical indicators.”

— Ristomatti Jönkkäri

Comments from the CEO

”We are grateful for the analysis by Risto-Matti. For us, it is important to follow that our three funds create monetary value for our clients. As of 31.12.2017, the investor return is now a total of 18.9 mln euros. We have yet not published this data more frequent nor on fund level as we think the consept is still novell for many and there is a risk of misunderstanding. We are looking to build on this first step which is publishing the aggregate number of euros created to clients since inception.”

– Tommi Kemppainen, CEO

How do you plan to avoid losses in a recession?

Making an economic forecast is difficult. How long until we face the next recession, no one knows. One thing is certain, though. Companies, governments, and consumers have more debt than ever before. To make sure everyone has a maximum amount of debt, we already once had interest rates down at zero.

On the video above, the HCP Black Portfolio Manager Tommi Kemppainen discusses why it is important to be defensive in the current market situation. The video is subtitled in English.

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The GDP Growth is Based on Debt

In normal economic conditions, the GDP grows if the working population grows or the productivity increases. In Western countries, however, the population is aging and the dependency ratio weakens fast. The productivity, on the other hand, is something that is hard to increase rapidly.

The GDP growth that we have experienced during the last decades is largely based on debt. Consumers, companies, and governments have been borrowing money and we have achieved GDP growth with credit spending.

Why Should One Worry About a Recession Now?

Many may think that there was a lot of debt already back in 2007. As the stock exchanges around the world survived the crash that began in 2007, why wouldn’t we be able to turn on the plus side now, in 2018? Has something changed? A high amount of debt and higher-than-average stock valuations continue to be true in the world economy in 2018.

The difference compared to 2007 is that we now lack the possibility to cut interest rates in order to revive the economy. That remedy was used up by the Fed and the European Central Bank already in the 2007–2009 stock market crash when they dropped interest rates to zero.

A Historical Reminder

”Sooner or later a crash is coming and it may be terrific” – Roger Babson

An American entrepreneur Roger Babson (1875–1967)  foresaw the Great Depression that started on Wall Street in 1929. Babson was first two years and then one year too early. Then he was right on time. Being defensive two years before Black Friday, Babson missed a 100% rise, but after the market had fallen back to the levels of two years before, it still fell another 75%. Babson also missed this fall.

Very often, there is news about how dangerous it is if you miss the top ten days in the market. But a lesser-known fact is that, if you manage to stay out of the market the worst ten days in this period, you might come out as a winner from a recession.

Invest Defensively with HCP Black

The multi-strategy, multi-style fund HCP Black aims for the best risk-adjusted return through active diversification. HCP Black fund is already positioned defensively. Even so defensively that if the market now fell dramatically, it’s likely that the value of HCP Black would rise.

The majority of the portfolio is made up of investments that should be as different from each other as possible. That is why no single shock should affect all investments at the same time. Therefore, gaining returns should be possible also during a recession.

HCP Black Allocation

HCP Black Allocation

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This text is edited by Miika Koskela based on Tommi Kemppainen’s collected articles from 2015–2018. Read all the articles on HCP Black Blog.

An Asset Manager with a Mission to Redefine the Financial Sector

What makes a good asset manager? Obviously, an asset manager has to generate added value to the customer. What if we said it’s not enough? A great asset manager generates added value to all its stakeholders.

At Helsinki Capital Partners (HCP), we combine top-notch investing skills, transparent pricing, and respect for clients with work on improving the well-being of society. Investing in our funds is impact investing.

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First Asset Manager with a B Corp Certificate in the Nordics

The idea behind the foundation of Helsinki Capital Partners (HCP) in 2007 was clear: a desire to be an open and honest asset manager. From the beginning, we have been committed to complete transparency in our operations. It is a self-evident fact for us that customers are told how much they pay both directly and indirectly to the company for our service.

In the year 2017, Helsinki Capital Partners’ persistent work was acknowledged with a considerable international recognition. HCP was awarded B Corporation Certification, which is one of the most demanding sustainability certifications in the world.

”The B Corp Certification offers us concrete tools to systematically assess our sustainability performance and make our performance public. The certification separates the authentic mission-based companies from the green and whitewashing masses,” summarizes Tommi Kemppainen, the CEO of Helsinki Capital Partners.

Tommi Kemppainen at the B Corp Summer Summit in Cascais in May 2017.

B Corporation network has provided us with plenty of chances to get to know like-minded companies and individuals. Inspired by the B Corp Summit in Cascais, HCP organized Best for the World Summit in Finland to bring together people and companies, who want to use business as a force for good.

Making a Difference in the Financial Industry

The financial sector is known for issues such as encouraging short-term thinking, irresponsible processes, and hierarchical management structures. In addition, products and services are often very complex and carry hidden costs. For this reason, it is often challenging for the customer to understand their own investment needs and the features of the available investment products, especially their pricing.

HCP is a forerunner in bringing responsibility to the financial sector. Our ambition is to take part in building a more trustworthy, transparent, and ethically sound financial industry. All our operations are guided by our value proposition: Asset management to be proud of.™ We always focus on the best interest of our customers, which is also why we have eliminated all incentives, such as staff bonuses and hidden fees, from our operations. We want to take part in building a healthier and better financial sector and a better society in general. This is not an easy task in an industry that has been caught for countless misconducts, but we are taking on the challenge.

More Culture for the Society

As a company, we are a part of society in many ways. We do not limit our role in society to only providing financial services and paying taxes. In other words, we take the freedom to make our interaction with other members of society into something that creates as much value as possible. In order to keep our minds fresh, we strive to be an active member of society, working alongside as many other entrepreneurs and professionals as possible, on projects that are in line with our values.

Last year, we mainly took part in music events, supported artists, and promoted athletes. What characterizes all these projects is the collaborative aspect: making something great together. We do not simply donate money, but we participate in all projects from the beginning to the end by offering our resources, network, and expertise. The indirect and direct spending causes money to circulate in society in many more ways than is the case with sponsoring or donating. In 2017, we used approximately 61,000 euros on cultural collaboration, and 16,000 euros on microfinancing entrepreneurs.

The #HCPSPIRIT label serves as a tool for sharing, branding, and communicating cultural projects that we are involved in. The hashtag was created as a label to represent all the work that we do that is not directly linked to asset management. The #HCPSPIRIT label is used on different social media channels and printed media during events, and it’s becoming increasingly recognized. We encourage our stakeholders to share both good and bad experiences publicly using this hashtag on social media. This way we receive real-time feedback from our stakeholders.

”HCP has not yet innovated an investment vehicle that invests into culture and music but HCP has been using about 10% of its revenue in Cultural Productions such as music events. This way investors can benefit not only from the investments into HCP’s products but also make a positive impact by supporting cultural productions in Helsinki and abroad,” says Elias Koski from HCP Artists.

Care to know more? Book a virtual meeting with one of our experts or drop by at our office in the Cable Factory at any time.

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Investing in a few superstar companies provides the highest returns

HCP Focus fund is among the top 15 best-performing globally investing equity funds. It has reached a stupendous 152% 5-year performance with a very highly concentrated portfolio.¹ Now the Fund Manager Ernst Grönblom discloses all the stocks in the fund and reveals his next picks.

Currently, HCP Focus holds only 12 positions. Eleven of those are technology giants such as PayPal and Facebook, that have become dominant players in their sector. The Fund Manager Ernst Grönblom has successfully proven that most of the shareholder value comes just from a handful of stocks.

”The market systematically underestimates and misunderstands the power of the winner-take-all phenomenon,” Grönblom says.

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Grönblom seeks for companies that have a long-term potential to displace their competitors. Target companies benefit from megatrends such as globalization and network effects.

”A good example of network effects is the online marketplace Mercadolibre, which I have had in the portfolio since the beginning. In its own sector, the company has become the largest and most profitable company in Latin America, largely because of network effects. As a long-term investment, it has also been one of the best-performing stocks in the world, with an average annual growth rate of over 30% for more than ten years. Now Alibaba grows and conquers the Chinese online market in the very same way,” says Grönblom.

HCP Focus fund currently holds only 12 stocks. Most of them have posted significant gains in the past 2 years.

HCP Focus fund currently holds only 12 stocks. Most of them have posted significant gains in the past 2 years.

Focus’ investment strategy is extremely concentrated and the investment horizon is long. Grönblom only buys companies that he expects to hold in the portfolio for more than 10 years. Grönblom tries to identify superstar companies early on. For example, he bought Amazon’s stocks already in the early days of his strategy.

”I have owned Amazon’s shares almost since the beginning of the strategy, that is, more than ten years ago. However, as the market situation changes, I may change a significant part of the portfolio’s content. The last major year of change was 2017 when I replaced as many as five companies in the portfolio.”

Although most of the shares in the portfolio are digital platform giants, HCP Focus strategy is not restricted to one industry. Currently, the best performing stock in the portfolio is FeverTree, that is, a company producing premium mixer drinks.

So, what is Grönblom going to buy next? The fund manager is considering investing in another three digital platform companies: EtsyZillow Group, and GrubHub. Grönblom is also looking into buying some shares of Nvidia Corp, that is, a company famous for computer graphics drivers.

Read more on on the portfolio’s Fund Presentation or Focus Homepage.

Portfolio Manager Ernst Grönblom

¹ Hoikkala & Liman: ”One of the World’s Top 15 Fund Managers Reveals His Next Picks”, Bloomberg, Oct 16th, 2018.

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#HCPSPIRIT at Superwood Festival

Superwood is a festival on Nordic oddity, pure beauty, and woodland vibes. The festival is curated by Ivana Helsinki, that is, a Finnish independent fashion, art, and film label. This year the festival was organized on 12th till 14th of October.

The festival has been called ”an urban weekend at the summer house in the spirit of Twin Peaks” by its founder Paola Suhonen. You couldn’t put it much better. Some quirky installations and curious performances around architecturally exceptional Hotel Rantapuisto really bring out a unique dreamlike atmosphere.

During the festival weekend, we were blessed with beautiful autumn colors and warm but foggy nights, that made the festival an unforgettable experience.

We at HCP were happy to take part in Superwood by producing the Campfire Unplugged music performance at the festival beach front.

Campfire Unplugged with #HCPSPIRIT

Musicians Anthony DawoudFelix Lybeck, Henri-Aleksi, and Julia Delgado played intimate versions of each other’s songs as well as some cover versions of campfire classics. The shamanistic atmosphere was completed by surrounding art installations made by Luca Delgado and lights by Jyri Sucksdorff.

We’d like to thank all the festival guests & organizers, Paola & Pirjo Suhonen from Ivana Helsinki, and our own great artists for a magical weekend.

Anthony Dawoud, Henri-Aleksi, Julia Delgado & Felix Lybeck