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Sweden's Tundra Fonder to double fund range, add currency share classes and managers

  • By: Jonathan Boyd
  • 01 Mar 2013
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Swedish boutique Tundra Fonder has provided more information about its growth plans, including an increase to its fund range from three to seven funds, adding the ability to offer dollar and euro share classes across its products, and employing more managers.

The company plans to add three new funds to its range by the summer, starting with a frontier markets fund - likely to be called Frontier Opportunities - launching by mid-March.

A fourth fund will be launched by the autumn. The pipeline of funds beyond March is at a stage whereby it is not possible to provide further details ahead of regulatory approval, said Johan Elmquist (pictured), portfolio manager and partner.

The frontier markets fund will seek to differentiate itself by having less focus on the Middle East, and more on the most populous frontier markets, added Mattias Martinsson, CIO and partner.

The development of multiple currency classes is partly linked to Tundras agreement to allow Finnish insurers Alandia-Bolagen and Ålands Ömsesidiga Försäkringsbolag to take a 9% stake each in the business (reported in January by InvestmentEurope ). This deal increased the capital base on which to pursue growth.

Finland uses the euro, of course, but the company has also had indications of interest from non-retail investors in other jurisdictions, which suggest there are benefits in being able to offer share classes in different currencies, albeit non-hedged, Martinsson and Elmquist said. Currently the manager's funds are eligible for marketing in Sweden, Finland and Norway.

No firm date is given for adding the new share classes. Partly this is because the relevant mechanism is yet to be fully determined. Discussions are ongoing with Sweden's regulatory authority on the specific changes required, but it is likely to be done by allowing funds' boards discretion to decide themselves when additional classes might be introduced.

If these plans develop as hoped, then additional dollar, euro and NOK share classes could be in place by the summer of 2013, Martinsson and Elmquist said.

Also under consideration are income share classes. This is intended to meet demands from Swedish foundations in the first instance, particularly as they seek yield in the ongoing low interest rate environment.

The addition of new owners earlier this year was an important marker, Martinsson and Elmquist said. The company is about halfway through its initial three-year business plan that focuses on retail business, but by bringing in the type of ownership that the Finnish shareholders represent, it indicates to the market that there will be a move towards serving institutional investors anon.

The new shareholders in the business do not, however, suggest a change in focus in terms of the types of products that the manager will promote. It will retain its focus on unique markets such as Pakistan, and, for the time being, retail investors.

It is unlikely that the existing shareholders in the business would accept further dilution by inviting in additional owners, Martinsson and Elmquist said.

Neither will the company being looking to change its focus on organic growth. Some other managers in Sweden have been consolidating their own ranges and closing or merging some of their more niche products. However, Tundra does not see any logic in buying volume especially if it involves funds that other managers say they need to close because AUM levels are short of what they require for their own break-even, Elmquist said. Tundra is focused on lower break-even levels as part of its competitive edge in the industry, and which is seen as necessary in order to be active in niches where other managers feel they cannot.

As the company grows it may also consider locating elements of its business activities in other countries, said Martinsson. He noted that the comparative cost for certain types of investment professionals in Pakistan was between one-tenth to one-twentieth the cost in Sweden. An example would be locally based analysts, which Martinsson suggested were every bit as good as those found elsewhere, and whom could be used further in future.

So far Tundra has not had any sales resource of its own, but that is another area under consideration, Elmquist added.

 

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