AI Hedge Fund


HCP Black Best Multi-Strategy Finland

European


Fund Manager of the Year Finland

Morningstar



HCP Focus five stars

ACQ5

Fund Manager of the year Finland

Hedge Nordic


HCP Quant HCP Focus HCP Black

HCP Focus Strategy

The fund follows a value discipline of investing by purchasing primarily high-quality large- and mid-capitalization stocks at substantial discounts to the estimated intrinsic value. Concentrated on identifying exceptional companies that  are priced as “merely good” ones.

The portfolio holdings are focused on very few (8-15), deeply researched positions. The main valuation and purchase criteria are: (a) financial strength (measured by ROIC); (b) identifiable and sustainable competitive advantage, and; (c) quality of management. HCP Focus is a concentrated equity long only strategy with high upside potential.

 

HCP Focus Allocation

 

HCP Focus Monthly performance

Please note that past performance is not indicative of future performance. 
The HCP Focus strategy commenced operations 31.5.2007. 
The strategy has been operating under a mutual fund structure since 31.11.2012. 
The returns for the period 31.5.2007 – 15.12.2009 are gross returns (returns before fees). 
The returns for the period starting 16.12.2009 and onwards are net returns (returns after fees). 
All indices are total-return indices with all dividends reinvested. 
The return numbers are audited. All returns are calculated in euros.
 

HCP Focus Performance Chart


Please note that past performance is not indicative of future performance. 
The HCP Focus strategy commenced operations 31.5.2007. 
The strategy has been operating under a mutual fund structure since 31.11.2012. 
The returns for the period 31.5.2007 – 15.12.2009 are gross returns (returns before fees). 
The returns for the period starting 16.12.2009 and onwards are net returns (returns after fees). 
All indices are total-return indices with all dividends reinvested. The return numbers are audited. 
All returns are calculated in euros.
 

HCP Focus Portfolio Manager

Ernst Grönblom

Ernst Grönblom

Even though I don’t belong to that group of lucky people who always knew what they wanted to be when they grew up, business and investing have always fascinated me. I come from a family of entrepreneurs, and when I visited my dad’s office as a kid, I knew something interesting was going on.

Later, other interests took over, and my interest in investing waned. The final nail in the coffin was when as a teenager, out of curiosity, I read some of the classics of economic theory. Then – as now – financial theory was mainly built upon the concept of efficient markets.

The conclusion was crystal clear; if markets indeed are fully efficient (and what else could they be, since most informed people seemed to be saying so, including a handful of Nobelists), then most of what is called “investing” was nothing more than gambling; a fools errand with a negative expected return! No rational or honest person would want to be part of it.

I swallowed my disappointment and decided to pursue a legal career. However, I didn’t have to work for long before witnessing time and time again just how flimsily many big business decisions were made in the real world. This observation forced me to question my previous assumptions of rational agents and consequently also of market efficiency. I decided to give my original passion – investing – another chance.

If today somebody was to ask me whether markets are efficient or not, I would answer that my personal conviction is that most big markets are indeed very efficient, but not perfectly so. Consequently, achieving excess returns (alpha) is no doubt very difficult, but it should not be impossible.

My investing philosophy is built on a few basic assumptions about how markets behave and how to exploit its weaknesses. In its core is what Jack Traynor, one of the fathers of modern finance, called “Slow Travelling Ideas”. In Treynors’ own words: ”I see nothing in the arguments of Professor Eugene Fama or the other efficient market advocates to suggest that large groups of investors may not make the same error in appraising the kind of abstract ideas that take special expertise to understand and evaluate, and that consequently travel relatively slowly.”

I believe in other words that markets behave in a way that can be exploited by disciplined investors. One example is the so called “Amara’s law”, named after Roy Amara, a futurist who stated that people (and therefore also markets) tend to overestimate the effect of new technology in the short term, but underestimate the effect in the long term. A practical example is the technology bubble at the turn of the century, during which most investors sincerely believed that the Internet would completely revolutionize the business world in only a few years. When this prediction didn’t come true, the disappointment was enormous and stock markets collapsed. Today, when the modern Internet has been around for almost 20 years, it has impacted our everyday lives to a degree that even the most optimistic visionaries back then couldn’t have imagined.

I also believe that the two key success factors of active investing are: (1) the applied investment strategy and; (2) the portfolio manager’s skills. A fitting metaphor could be a racing scenario; it isn’t enough that the car (strategy) is top class if the driver (portfolio manager) can’t drive properly. A fund investor’s situation can be compared to a person betting on the results of a car race; the victory goes to the person who finds the optimal car-driver combination. A lot has been written about sound investment strategies, but surprisingly little about portfolio managers and the qualities they should possess.

I have come to the conclusion that successful active investing requires that the portfolio manager possess at least the following ten, partly overlapping, qualities:

  1. A relevant education
  2. Business experience
  3. Portfolio management experience
  4. Intelligence
  5. A rational temperament
  6. Self-confidence and independent thinking
  7. Patience
  8. Competitiveness and a passion for investing
  9. ”Strong nerves”
  10. Creativity

I don’t think that any of the above qualities comes as a big surprise to anyone. Someone might even ask: “So what? Why list obvious facts?” The answer is that a customer who is contemplating outsourcing the management of his portfolio to a third party is making a big and difficult decision. A structured “check list” increases the probability of making a good decision.

 

 

HCP Focus Value investing and investment strategy

In the below article we give an overview of the investment strategy, the underlying philosophy and the applied processes of the HCP Focus equity strategy. The cornerstones of the strategy may be describes as follows:

(1) Attempt to identify high-quality companies that may be purchased at a significant discount from our best estimate of underlying (intrinsic or fundamental) value; (2) assemble a concentrated portfolio (8 – 15 stocks) of such investments, and; (3) hold them until: (i) the intrinsic value of the security is fully reflected in its market value; (ii) the conditions regarding the security change so as to make the original investment thesis obsolete; (iii) a markedly superior investment opportunity appears; or; (iv) it becomes apparent that the original investment thesis was faulty. Article: Investment Strategy (PDF)

 

HCP Focus Choosing managers

The two most critical factors determining the success of an active investment strategy are: (1) the applied investment strategy, and; (2) the skill of the portfolio manager. A lot has been said and written about strategies, but manager skill has received surprisingly scarce attention. Active managers are chosen based on their (implicitly) assumed skill.

We could use the metaphor of a car-race: it’s not enough that the car (the strategy) is first-class if the driver (the portfolio manager) doesn’t know how to drive properly. Investing in a fund can be likened to betting at the races; the victory goes to the one who finds the optimal driver/car -combination.

In the below article we address two questions: (1) what personal characteristics – if any – are correlated with good investment returns?, and; (2) are there any reliable and objective means to identify such skill in advance? article: Choosing Managers (PDF)

 

HCP Focus Managing a portfolio

All active, relative return strategies have in principle only one goal; to achieve a return that exceeds the return of an appropriate benchmark (usually an index) using more or less the same level of risk. One of the mysteries of finance is the fact that so few of them succeed.

Many have interpreted this as additional proof of market efficiency; that the markets are so efficiently priced that active strategies are simply doomed to underperform (the so-called “Efficient Market Hypotheses”). A substitute or at least complementary hypotheses is that most funds are structurally disadvantaged.  In the below article we address the problem and present a number of possible solutions. article: Focus Investing (PDF)

 

HCP Focus Investing and megatrends

Both financial theory and practical experience clearly show that the most successful investment strategies are usually long-term strategies.

The longer the investment horizon is, the more important it is to account for megatrends in the decision-making process.

Good examples of currently active trends are globalization, the digital revolution and the demographic shift, taking place in the industrialized world.

In the below article we discuss a number of such trends from the vantage point of the long-term investor. article: Secular Trends (PDF)

 

HCP Focus Investment wisdom

“If I have seen further it is by standing on the shoulders of giants.”

This famous quote is traditionally attributed to Sir Isaac Newton in his 5.2.1676 letter to Robert Hooke, although the original phrase itself probably originates from the 12th century Neo-Platonist philosopher Bernard of Chartres.

It has come to stand for an attitude of humility and gratitude for the passed-down wisdom of past and current masters, and a method of discovering truth by building on previous discoveries. To some, this might seem like a meekly admittance of one’s limitations, but if Newton, one of the most brilliant minds in the history of mankind, had no trouble admitting it, why should we?

According to an old proverb one should not “reinvent the wheel”. It would be both arrogant and foolish to attempt solving problems that others, much wiser than us, have solved long ago.

When we actively try to learn from our predecessors we simultaneously free up scarce resources that can be used to find creative and effective solutions to those problems that actually are unique to us and our clients.

Below is a collection of business and investment related quotations by both well known and less well known investing legends and other people worth looking up to and learning from. They have inspired us and they also allow you to get a good glimpse into our way of thinking. Enjoy!

Investing quotes (PDF)

 

HCP Focus Equity Analysis

EXAMPLE ON OUR EQUITY ANALYSIS (eBay PDF)

 

Our Funds

HCP Black

We focus on analyzing the fundamentals of each investment to see how much it is related to the other investments we have. This active diversification that starts from the fundamentals should result in high return compared to risk.

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HCP Focus

The fund follows a value discipline of investing by purchasing primarily high-quality large- and mid-capitalization stocks at substantial discounts to the estimated intrinsic value.

Read more »

HCP Quant

Using a systematic quantitative investing strategy reduces human error in investing. HCP Quant diversifies investments into small and midsize companies globally.

Read more »