Hedge Fund Brummer Allocates $500 Million to U.K. Managers

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Swedish hedge fund Brummer Multi-Strategy is partnering with two investment teams in the U.K. to explore opportunities in the industrial and financial sectors.

The Stockholm-based fund, which has $4.3 billion in assets under management, is handing $250 million to Kersley Street Capital LLP and Pantechnicon Advisors LLP each, said Mikael Spangberg, who oversees Brummer & Partner’s flagship fund along with its founder Patrik Brummer.

Though both firms were only recently incorporated, Spangberg says he knows the people behind them well, “and they have proved themselves in difficult markets.” Kersley was founded by Martin Deurell, while Pantechnicon is run by Daniel Johansson and Gustaf Lindskog.

Brummer has spent the Covid crisis jettisoning managers that failed to deliver adequate results, creating room for newcomers to fill the gap. “Those are the rules of the game, it’s a performance business,” Spangberg said.

The hedge-fund manager started exploring a U.K. partnership after it saw signs of a recovery from the pandemic in the spring. That paved the way for the multi-strategy fund to move away from the defensive positions it had built and into more offensive allocations.

The Vetting Process

Spangberg says about 30 different asset managers were reviewed before Brummer settled on the two London-based teams, who offered long-short equity strategies in markets undergoing structural changes.

Brummer is part of a Swedish hedge-fund industry that was recently rocked by the demise of one of its oldest members, Informed Portfolio Management, which folded in April after investors pulled about $4 billion in funds. IPM had relied on statistical models and computer-generated strategies, which failed to predict how the pandemic would affect markets.

Spangberg says his funds are more diversified and therefore less exposed to sudden shocks than IPM was. “Our investors, and we as a business, take comfort in having a multi-strategy platform as it makes us less dependent on the success of a single strategy,” he said.

“Our thesis is that the coming years will be more demanding for beta strategies, while offering great opportunities for generating alpha,” Spangberg said, referring to investment models that either track the market or look for ways to generate extra value.

The challenge is navigating through an environment in which “the margin of error is very small for central bankers as they ponder how to wind down stimulus,” and that means investors should brace for more volatility and dispersion within asset classes, he said.

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