Stockholm (Ekonamik) – In view of this week’s alternative investments theme, Ekonamik caught up with Allan Winkel Hansen, founder and CEO at WH Asset Management, a Danish FAIF founded in 2014 with the purpose of managing Alternative Investment Funds, of which it has two: WH Index A/S and WH Index Growth A/S. Mr Winkel Hansen is also founder and CEO at WH Invest, a registered investment advisory service founded over 20 years ago in 1998, and previously honed his skills at Jyske Bank, where he managed investments for wealthy Private Banking clients. As Mr Winkel Hansen says, try not to be too “in love” with positions…
How have you been since we last spoke? Could you give an overview of your performance the past year and how the firm has been adapting strategy-wise to achieve exposure?
It has been approximately two years since we spoke. Last year, the performance was negative by -4.85%, but year-to-date the fund is up by 9.80%. Last year the financial markets ended quite negative and in the beginning of December, we decided to reduce the exposure to equity markets in order to reduce the potential losses. When the market started better than expected in 2019, we initially increased the market exposure and then, starting in May, we again gradually reduced our investments.
One of the main purposes of your multi-asset fund WH Index is to reduce the volatility of fund performance to deliver attractive risk-return. At a point in the market cycle where volatility is a staple and further interest rate cuts are expected, you have an advantage in that you are already diversified as a multi-asset fund. Can you explain how your alternative investment strategy offers a continued secure path to portfolio diversification?
Historically, the fund has benefited from the falling interest rate levels, as this has had a positive impact on the main asset classes in the fund. At this stage of the market cycle it has become more complicated to secure that our various asset classes do give us the necessary diversification. We have therefore become a bit more focused on tactical asset allocation, which our answer to your first question also indicates. Furthermore, we are considering including new asset classes (for instance, gold), in order to secure an attractive risk-return profile going forward.
With the unusual degree of shifts in equity-bond correlations and the increasing likelihood of a market correction, do you see difficulties in neutralising risk exposure through diversification, and if so, which difficulties?
Yes, as mentioned above, I do see difficulties in neutralising risk exposure through diversification, which is why we are considering new ways or instruments, which can help us achieving this. However, we will continue only to have very liquid investments in our portfolio.
Which asset classes do you see as still on the safe side and what assets are you currently interested in?
It is hard to see any asset classes that are on the “safe side”. Obviously, now there seems to be a huge demand for government bonds, but would you continue to buy when 10-year German bonds are trading with a negative yield of -0.6% p.a.? Therefore, we choose to be lower invested than usual. We still hold a combination of equities and fixed income products and with our equity exposure, we have gradually converted our exposure into indices which follows a value-oriented strategy.
Alternative investments are experiencing a dramatic technological shift, with computers increasingly determining trading decisions. How are you adapting in terms of the overwhelming prevalence of AI and algorithmic trading?
We follow the development and do speak with managers who use AI and algorithmic trading, but we have not adapted any of these tools at this stage.
The appeal of cryptocurrencies is that movements are uncorrelated with the rest of the market, and based on deriving value from growth, adoption and regulation, as opposed to GDP, profitability and interest rates for stocks and bonds. Is this an asset class that interests you or do you see it more as a bubble, like many alternative investment managers?
I have to say we do follow and study the cryptocurrency market and notice that it is often uncorrelated, however, at this stage we are not comfortable with having an exposure to this asset class.