Portfolio Structure

Focus on creating positive returns by pairing bought shares with sold shares.

In order to reduce the risk of losing money the portfolio cannot simply be composed of bought and sold shares, as this will at times result in a very high degree of risk. As with any other kind of investment it is necessary to spread one’s portfolio among different companies and different kinds of investment so that the portfolio as a whole can be expected to fulfil one’s objective.

The Fund employes two different approaches in selecting its investments: A balanced approach and a more opportunistic approach.

The mix between balanced and opportunistic positions may vary considerably and is governed by Carnegie Asset Management’s view of the market risk and assessment of attractive buy and sell opportunities.

The balanced approach (“pairs”) – buy Nokia and sell Ericsson
This approach balances a bought position against a sold position. An example might be to buy Nokia and sell “borrowed” shares in Ericsson, a so-called “pair” position. The goal is to earn the difference between the price development of the two shares while reducing or eliminating the market and sector-specific risk. Even if there is a fall in share prices, including Nokia and Ericsson, it will still be possible to obtain a positive return provided that Ericsson falls more than Nokia. Conversely, in a rising equity market there will be a positive return if Nokia rises more than Ericsson.

The opportunistic approach – buy Nestlé and sell General Motors
In this approach the portfolio manager chooses to buy and sell unrelated shares. An example might be to buy Nestlé and sell “borrowed” shares in General Motors. In this kind of portfolio there will still be the element of hedging some of the market risk, but the sector risk will not be hedged, which means that a higher degree of risk will be involved than in the first approach.