Using business to fix our future

We attended the fourth European B Corp Summit – the gathering of purpose-driven businesses – on the 23rd and 24th of September. Almost 700 people from 23 countries attended two days of inspiring panel discussions, workshops and networking opportunities in Amsterdam. The event was organized by the non-profit B Lab Europe which helped HCP get certified in 2017.This was the third time we took part since becoming a B Corp. We could see that the B Corp network is becoming bigger and their message of balancing purpose and profit louder.


Businesses have a responsibility to work together to build a more inclusive economy and B Corps are at the forefront of this movement.  We are proud to be a part of this movement as the first B certified company in Finland.

Messages from the B Lab and other B Corps

Jay Coen Gilbert, co-founder of B Lab and the B Corp movement declared: “We don’t have much time left to make sure we can preserve our home not just for us but for future generations. […] Incremental change is insufficient, individual change is insufficient. We need systemic change”.

A systemic change may be hard, but we have seen some promising initiatives lately. In September, the Financial Times declared it’s time to reset capitalism. They are examining a model of free enterprise capitalism that does not focus on maximizing shareholder value under the heading of the ‘New Agenda.’  

The Business Roundtable, an association of CEOs of leading US companies including Apple and JP Morgan Chase, announced in the New York Times that they are committed to lead for the benefit of all stakeholders.

This is also our mission and the mission of the B Corp movement. But what we need now is action beyond nice words. We need to walk the walk – as it appeared in the response by a group of B Corps to the above NYT piece.

B Corp letter to the Business Roundtable

Some of our B Corp friends like Patagonia and Ben & Jerry’s have hit the streets to support climate strikes. “We need to stand out because with more heads, it will become easier to build a more sustainable future. This is the power of the B Corp community,” stated Anuradha Chugh, Managing Director at Ben & Jerry’s.

Some other B Corps work within their line of business.

What is the role of finance?

In the summit, we were happy to see many other financial service providers that have joined the B Corp movement. Some are seeking to build a better future by directly financing companies and innovative solutions for a more sustainable tomorrow.

We were especially pleased to meet people from a Swiss private bank, Lombard Odier, that got B certified earlier this year. They have been in business for more than 200 years, and surely know something about sustainability in finance.

Their Head of Corporate Sustainability, Ebba Lepage stated that: “We see our role as a thought leader, leading the change. […] We invest in sustainable business models because we believe they do good for the world and have good business models that will last.”

At HCP, we want to be a part of a more sustainable future by leading the change we want to see within the financial service industry.

“We believe HCP’s way of operating as a business can demonstrate how an asset manager can be responsible. It is not just about launching green bonds and ESG funds. We emphasize having a high standard on governance and we disclose what we do – from how much tax contribution we make to the company’s pay structure. If we cannot be a responsible business ourselves, how could we preach others to be one,”  stated Jo Iwasaki from HCP. 

We would like to believe that we demonstrate to the world that the financial service industry can be a force for good.

Leading the beat of purpose-driven business 

We believe that the B Corp movement is one of those initiatives that carries a promise of a more sustainable tomorrow. We wish to encourage more business leaders to think about their mission and contribution to the wellbeing of the world by promoting the idea of B Corporation at Slush, that is, the leading tech start-up event in the Nordics.

We host an afternoon event on 22 November at Mesukeskus, attached to Slush but not within the main area, so you don’t need a Slush ticket to join us. At this event, we will have a presentation by B Lab, a couple of B Corps to share their experience of getting certified and what it brought to them, followed by a self-assessment session.

If you wish to know more or attend, email our investor relations at

We will follow this by a networking event (’HCP lounge & sauna’) back at the HCP office at Kaapelitehdas/Cable Factory, where we can continue discussions on the topic.

Telling HCP’s B Corp Story

B Corp Summit attendees taking a break in between workshops

At B Corp Summit in Amsterdam, I was asked what problems I face when telling my company’s story. In my work at Helsinki Capital Partners (HCP), I try to tell people that the way their financial service provider does business really matters. And most of the time nobody cares.

The financial sector has a bad reputation for a reason. It is known for incentives encouraging short-term thinking, irresponsible processes, and hierarchical management. In addition, financial products and services are often very complex, they carry hidden costs and they might not even be in the clients best interest.

This is a problem within the industry. How you treat your clients, workforce, and how you give back to the society are questions that have to be answered within any given company.

We have thought of these questions carefully, and our answer is not to be a prick.

Not being a prick in our line of business includes committing to transparency. It is self-evident for us that clients are told how much they pay both directly and indirectly to us for our service. We focus on the best interest of our client, which is why we have eliminated all short-term incentives, such as staff bonuses, from our company.

The #BCorp certification makes our business even more transparent. Moreover, it encourages us to consider our impact on all of our stakeholders.

We operate as a limited liability partnership, where all the permanent employees own a share of the company. They will prosper if the company will. On the other hand, if the company would go bust they would lose their money. This is the healthiest incentive for employers long-term thinking we can imagine.

The shareholders are important for a company. However, they are only one stakeholder group to take into account. This is as obvious to our company as it is to all of us as individuals. A life where you only value a high salary and fat dividends is a poor one. We want more!

Meeting people from other mission-driven companies is always inspiring. They are ready to #leadthebeat of human-faced capitalism, where businesses balance purpose and profit.

They care.

Thank you all who made it to #BCorpsummit2019! It was great to hear your stories and share ours.


Best for the World: Workers – HCP honored by B Lab

The asset management company Helsinki Capital Partners (HCP) has been honored by B Lab for its way of working, which takes into account unusually widely employees’ interests.

HCP is praised for its unusually small pay gaps between employees and for having all permanent employees own part of the company.

Communications and customer experience manager Miika Koskela bought a partnership stake in the company in spring after working at HCP for two and a half years.

”I invested in the opportunity to eat the fruits of my labor. Now that I own HCP shares, I am even more interested in the sustainability of the business and the value it creates for owners, employees, clients, and the society around us.”

CXM Miika Koskela

HCP is also honored for its low hierarchy and openness in the work community. All projects that go on in the company are logged into its intranet, which all employees have access to. Anybody in the company can start a project whose cost is less than 10,000 euros without a supervisor’s approval.

Employees are encouraged to manage themselves. Nobody’s working hours are supervised and remote work is always allowed

Pasi Havia, an HCP portfolio manager with a background in the IT sector has made use of remote working by having his office first in Spain and now in Estonia. He considers free working hours self-evident.

”If I dug ditches for a living, keeping track of working hours might make sense – in the IT sector, not so much. Bad code does not become better by throwing more hours at it. This applies to all knowledge work.”

Pasi Havia

Fund Manager Pasi Havia

In 2017, HCP was the first company in Finland to receive B Lab’s B Corporation corporate responsibility certificate. B Corporation companies are profit-seeking firms with a mission. They seek to take into account all stakeholder groups – not just the company’s owners.

”You might compare a company to an individual person. If the entire purpose of your existence is to make profits, your life is rather poor,” comments HCP’s CEO Tommi Kemppainen.

Tommi Kemppainen

CEO Tommi Kemppainen

B Lab, B Corp, and Best for Workers

The non-profit B Lab grants the B Corporation certificate to companies who meet extremely stringent environmental, societal, and governance criteria. The world has 3,000 B Corporations in 64 different countries and in 150 different branches of industry.

B Lab honors 10% of certified companies who take into account their employees and other stakeholder groups particularly well. HCP has already been named two years in a row as best for workers.

”Best for Workers honourees have an exceptional corporate culture, work environment, worker health and safety practices, ownership and compensation policies, and other employee-centric practices. Companies like HCP represent the kinds of impact-driven business strategies that are inclusive, regenerative, and delivers value to all stakeholders, not just shareholders,” comments Anthea Kelsick from B Lab.

The list of all honored companies:

We Are Proud to Have Reached €100 Million in Assets Under Management in Our Own Unique Way

Here we are – we’ve just reached our first €100 million in assets under management (AUM). We aren’t the first firm to achieve this. But we are unique for having done it fairly and transparently to all our stakeholders.

Fairness to our clients

We have reached the €100 million AUM threshold with a transparent fee structure applicable to everyone. We have also returned all thinkable and unthinkable kickbacks to our clients (e.g. trailer fees, sales charges, and structuring fees). We have done it before Mifid II came into effect – since our inception in 2007, instead (read: HCP Initiative). We respect our clients and demonstrate it in the way we operate. We are grateful for your trust, now and ever.

The way we work

We are also transparent in our salary structure. The lowest salary of a permanent employee – excluding new partners – is only 35% lower than the one paid the most. We pay no bonuses.

We reward everyone committed to the company by making them an owner. Staff who have joined after the company was founded collectively own 38% of the company (if we include current employees who have been here since the day one, this goes up to 57%).

We own this company together. We have said that we respect everyone, and this extends to employees. This is important for us, because we want to create long-term value.

Best for the world

We want to show a positive example for how to operate in the financial services sector. We are one of the very few B Corp asset managers globally. If you are interested in how we have qualified for this prestigious certification, you can check out our B Corp profile.

This year the B Corp community saw another – and very significant – example. Lombard Odier, a long-established, and highly respected Swiss banking group, also received B Corp Certification. We are delighted that they have become part of our B Corp family – with its CHF 259 billion in AUM.

We might need the next 20 years before we reach our first €1 billion in assets under management at the current pace, and we are prepared for this long-term journey. We anticipate a possible recession, and for years already, we have accumulated a safety buffer. This is to make sure that we can ride out the waves even in the period of economic downturns.

We do our best to continue growing and to be part of this industry. This is important for the society around us and for our stakeholders engaged with us via our #HCPSPIRIT activity.

Let’s imagine what we do could together with €1 billion  under management. We’re already working to make this a reality.

Read more in our Sustainability Report 2018.

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!
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.


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:

(Tjänsten är gratis, men förutsätter registrering)

Fondens hemsida:

Ett urval färska artiklar om Fonden: (lagt till 17.9.2019) (lagt till 17.9.2019)

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.

Book a virtual meeting Make a subscription

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:

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