Hedge Fund of Swedish Industry Titans Thrives on Disruption

(Bloomberg) -- Paying more attention to transformation than valuation when picking stocks has helped Sweden's Adrigo Asset Management deliver an 82 percent return over the past decade.

“Our keyword is change,” Goran Tornee, chief investment officer at Stockholm-based Adrigo, said by phone on Thursday. “It's not difficult to find low or high valued companies. But they will remain that unless there's any change.”

The 3 billion-krona ($370 million) fund has returned 82 percent since its inception in 2006, posting only two losing years. It's backed by investors such as billionaire Melker Schorling and Carl-Henric Svanberg, the chairman of BP Plc and the former Ericsson CEO. Both have put money in the company, as well as the fund.

Using fundamental analysis, the fund targets a 4-8 percent return at a lower risk than in the Nordic equity market. Net exposure is only about 20 percent, which means the fund will rise or fall less than the market. When global markets were going up in flames in 2008, it lost only 3.5 percent.

“We wanted to create a structured product with limited risk which was transparent,” Tornee said. “The word hedge means less risk for us.”

Tornee, 53, says the fund invests on a time-frame of 18 to 24 months, taking 20 to 40 long and short positions while containing risks by monitoring correlations within the portfolio and buying large, highly liquid regional companies. But it's now also starting a new Nordic small- and mid-cap fund where the risk level will be higher.

“Our objective is to create alpha,” (returns that exceed the benchmark) he said. “It's very difficult to foresee where the market will go.”

Adrigo visits about 200 to 250 companies a year. It ignores macroeconomic conditions, according to Tornee, who started the fund after a career as a partner at Cheuvreux in the Nordics and head of equities at SEB Enskilda from 1989 to 1999.

Cheers Carlsberg

It currently has long positions in Carlsberg A/S, Danske Bank A/S, Telia Co. AB, Volvo AB and Securitas AB.

Carlsberg now has “relatively” a new management with an “aggressive and credible strategy” to raise margins, while Securitas is in the midst of a digital transformation and Telia has a strong cash flow after leaving “some sad years behind,” Tornee said.

While Tornee declined to disclose short bets, companies it's not long on now include Svanberg's old home, Ericsson, as well as Danish pharmaceutical giant Novo Nordisk A/S.

--With assistance from Neil Callanan

To contact the reporter on this story: Jonas Cho Walsgard in Oslo at jchowalsgard@bloomberg.net.

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net, Tasneem Hanfi Brögger