External Managers

Main features

2018 was a volatile year, with negative return for most risky assets. The global equity market fell 8,7% (USD).

The return for 2018 was 2,5% (USD), with strong results for the Macro mandate which returned 9,9%.

We utilized the market turbulence in the fourth quarter to allocate capital to the Asian equity markets through actively managed long-only funds.



The positive sentiment following Donald Trump’s tax reform towards the end of 2017 continued into 2018. However, after four strong weeks where MSCI World rose 7%, sentiment turned 180 degrees and culminated in a collapse in the volatility markets February 5th, in sharp contrast to the calm environment in 2017. This also noted the top in equity markets for 2018.

The trade war between the US and China, but also between the US and Mexico, Canada and Europe, was one of the prime drivers of volatility throughout the year. The Asian equity market was down 17% by the end of October, and ended 2018 down 13,9%, while the Chinese onshore index (Shanghai) ended down 26,9%.

Political uncertainty in Europe was another driver of market volatility throughout the year. After La Lega Nord and populist party Five Star Movement’s election victory in Italy, the market begun to worry about Italy’s economic policy going forward. The EU and Italy reached an agreement on the 2019 budget as late as December 29th. The other worry was Brexit. Apart from the negotiated proposal with the EU, there was no real progress throughout the year, and the British pound weakened 5,6% versus the USD.

As of the start of October, the oil price had risen 29%, and the Oslo Stock Exchange was up 15,5%. The oil price fell significantly thereafter (-37,6%), and ended 2018 down 19,5%. The Oslo Stock Exchange retreated and ended the year down 1,8%. The oil price decline and the negative sentiment in Q4 lead to credit spread widening, and the BAML Yigh Yield index fell 2,3%, while Bloomberg’s US Investment Grade index was down 3,7%.

The market’s worries surrounding growth and political uncertainty escalated in December, although fundamental US macro data were strong throughout the year. The US central bank hiked interest rates four times in 2018 to 2,5%. The increased interest rate differential to Europe and Japan and the strong growth in the US, lead to a strengthening of the USD by 4,4%. S&P500 posted a decline of 4,4%, Europe was down 10,6% (-14,9% in USD) and the global equity market fell 8,7%.

Activity and results

The main objective of Ferd’s investments with external managers is to complement Ferd’s direct investments through investments in alternative strategies, other asset classes and different geographies. The four mandates have different risk profiles and diversification properties. Relative Value and Macro have low market sensitivity, while the Global Fund Opportunities mandate is set to exploit our flexibility and capital predictability to make attractive investments in pockets of the capital markets with limited competition. For the Global Equity mandate, the objective is to achieve attractive excess return over time combined with a market exposure that complements Ferd’s total investment portfolio.

Ferd External Managers’ investment return for 2018 was 2,5%.

The relative value mandate returned 0,4%. The funds in this portfolio had a return ranging from -4,4% to 7,4%, and the portfolio’s largest investment also had the highest return. The macro mandate comprises three funds, and returned 9,9%. All three funds had good returns on both an absolute basis and compared to peers. Significant themes and drivers to return were interest rate exposure in Brazil, stressed government bonds and exposure to the USD.

The Global Equity mandate comprises both Equity Long/Short funds with moderate net exposure to the market and long-only funds. The return in 2018 was -3,6%, which was also the return for the three Equity L/S funds we are invested with. Among these funds, the main detractor was the exposure to the Asian market. We utilized the market turbulence in Q4 to allocate 30 MUSD to three Asian long-only funds. We have a long-term investment horizon for this investment, which complements Ferds’ other exposure.


Entering 2018, the size of the Relative Value mandate was reduced by 500 MNOK. We redeemed in two funds at the start of the year, and the portfolio currently comprises six funds, in which we on average have been invested for almost seven years. The market value at year end was 186 MUSD. Assets under management for the macro mandate was 97 MUSD spread across three funds.

Within the global equity mandate, we initiated toehold investments in seven different Asian long-only funds in Q2. The purpose was to prepare for potential top-up investments at a later state. Towards the end of October, we invested 30 MUSD in three of these funds. Assets under management for the global equity mandate stood at 111 MUSD at year end.

Within the Global Fund Opportunities mandate, we made one new investment during 2018 in the form of an attractive co-investment opportunity with an existing manager. Net cash flow for 2018 ws -2,9 MUSD. The market value at the end of 2018 was 106 MUSD, with remaining commitments totaling 418 MUSD.

Total assets under management at year end amounted to 500 MUSD across the four mandates and was invested with seventeen different managers.