Lux Nordic Financial Opportunities Fund

Performance since inception 106.5% (Inception 30.11.2010)

Performance YTD 5.5% (31.05.2024)

Unlike most other companies, the capital needs of banks and insurers are not determined by markets only, but also by regulators. While most other companies’ capital consists of shareholders’ equity only, a large proportion of capital of banks and insurers is in the form of bond-like instruments, such as hybrid capital and subordinated debt. These instruments are much more complicated than ordinary bonds, investors’ rights vary significantly between issuers, but also between securities issued by the same issuer. Add varying degrees of liquidity, and we have a large market with, at times, serious mispricings.

Lux Nordic Financial Opportunities Fund was launched on 30 November 2010 in order to take advantage of these mispricings. Although the fund can invest in any security issued by a corporate or government, the largest exposure is usually to so-called hybrid bonds (tier 1 instruments) in banks and insurers. More than 80% of assets must be invested in securities issued by bank, insurers and other financial companies – in practice this number is usually close to 100%. Equities can account for up to 25% of total assets. The fund can use leverage up to 20% of net assets.

The portfolio manager uses a fundamental approach to select target companies, and to select the type of asset that is likely to produce the highest risk-adjusted returns.

Monthly reports