Hedge Fund of Nordic Central Bankers Cuts Its Bet on ECB Hike
This article first appeared on the Bloomberg Terminal
(Updated at 2018-06-01 07:47:37 GMT). Reprinted with permission
By Jonas Cho Walsgard
(Bloomberg) — A hedge fund based in Scandinavia and run by
former central bankers has just cut its bet on the timing of the
European Central Bank’s first interest-rate increase.
Nordkinn Asset Management, which oversees about $1.3
billion, reduced its exposure to higher German and Swedish
rates, according to Bjorn Roger Wilhelmsen, a founding partner
and chief economist at the fund in Oslo. Wilhelmsen is one of
three partners at the fund who used to work at the Norwegian
central bank.
The adjustment in Nordkinn’s rate bet follows the breakdown
in talks to form a government in Italy, which earlier this week
led to a market meltdown that brought back memories of the 2012
euro-zone debt crisis.
“We had no positions directly in Italy, but it affects our
view of the ECB,” Wilhelmsen said in an emailed response to
questions on Thursday. “The likelihood that the ECB will raise
interest rates next summer will be a bit smaller. They are
likely to delay the interest rate hike a little.”
“This is due not only to Italy, but also to the fact that
macro data for the whole euro zone has come in weaker,”
Wilhelmsen said.
Nordkinn, which started in 2013 and is based in Stockholm
and Oslo, focuses on central banks around the world in a bid to
profit from changes to monetary policy. This year, the Nordkinn
Fixed Income Macro Fund has returned 1.5 percent in dollars.
After the shock to euro-zone debt markets caused by Italy,
Wilhelmsen says the Swedish Riksbank may also be forced to delay
its plans to start raising rates. Nordkinn has reduced positions
for higher longer-term Swedish interest rates. Instead the fund
has moved short-duration bets to Norway and the U.S., where
Wilhelmsen says the economic cycle appears to be “intact.”
“Norway and the U.S. will of course to some extent be
affected by what’s happening in the euro zone, but we believe
there will be rate hikes in both Norway and the U.S. in 2018,”
Wilhelmsen said.