The Asset management business has been started in early 2009 by launching Sanning Capital Limited (a bottom up long short opportunity fund) where we achieved above average returns by exploiting market inefficiencies across all sectors in equity, fixed income and equity related instruments of businesses somewhat related to Central and Eastern Europe.
To satisfy increasing demand for all types of energy, we provide to our clients services in following areas: supply, brokerage, risk management and advisory in both power and gas.
We provide emissions trading brokerage and advisory services. We are active in the frameworks of EU ETS, Kyoto and voluntary carbon markets. Of course, we are present on both: OTC and exchange markets cooperating with utilities, financial counterparties and clearing banks.
Occasionally, we have facilitated transactions or taken proprietary positions in this segment. The rapid development of the financial crisis and resulting elevation of the precious commodities into their safe haven status has prompted us to develop this business more systematically.
Corporate finance is where we have the longest track record of all. We offer unique insight related to either business sectors where we operate such as regulated business, energy and power and technology, or complex financial restructurings.
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Investment approach
Investment strategy
Our investments are based on detailed fundamental analysis of individual companies. We currently hold a various mix of stocks, fixed income instruments, commodities and structured products selected by the following criteria:
1. Defining the Upside
a) DCF – recognition, isolation and pricing of key boundary conditions or value drivers
b) Break up analysis
2. Macro is the driver
We are aware of the fact that macro factors currently determine financial markets more than before the European debt crisis. Stocks are more correlated and picking of outperforming shares is challenging at the moment. Therefore:
a) We decided to remain cautious and prefer low beta stocks with high dividend yields.
b) We prefer to buy fixed income investments of low indebted companies.
c) When having unique insight into companies, we enter into pair trades, e.g. buy shares of one company against sell-short of another.
Screening for opportunities
1. Based on partner’s recommendation the analyst maintains a list of opportunities called trading panel.
2. Each analyst leads the evaluation of the select securities and assigns the conviction on individual picks from 0 to 3. The fund does not invest into securities with conviction level less than 2. The conviction reflects the level of understanding of each driver.
3. When the upside is greater than 50%, the fund purchases the security followed by the complementary transactions:
a) Sale of the security where upside has been exhausted,
b) Leverage of the portfolio financing the purchase,
c) Hedging the position
Risk Management
1. Hedging tools comprise of:
a) High Beta stocks are hedged through put options on DAX and FTSE MIB (Milan index) or short selling other stocks
b) Cash and bonds
c) Low Beta Stocks present natural hedging due to the low correlation to the market
2. FX Hedging:
a) We expect appreciation of USD against Euro in the period of next 12 months
b) We expect short term depreciation of Euro and other CEE currencies since these economies are dependent of trade with Eurozone
c) The only exception in the CEE might be PLN because Poland has a huge domestic market and is not as dependent on exports as the others in region
