Industry veteran Martin Sandquist’s novel Antiloop strategy blends quant and discretionary trading

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Industry veteran Martin Sandquist’s novel Antiloop strategy blends quant and discretionary trading

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Co-founded by former Lynx Asset Management portfolio manager Martin Sandquist, Stockholm-based investment management firm Antiloop brings together discretionary and quantitative trading in a multi-strategy fund that spans commodities, equities, global macro and emerging markets.

Along with Anna Svahn, Antiloop’s co-founder, CEO and portfolio manager, and portfolio manager Karl-Mikael Syding, Sandquist runs the firm’s flagship fund, Antiloop Hedge, which spans four investment approaches – Tactical Asset Allocation, Global Macro, Long/short Equity, and Short-Term Trading.

The firm was established in 2019, and is set to formally launch Antiloop Hedge in the fourth quarter this year, with both Sandquist and Svahn upbeat on the range of opportunities emerging out of current commodities and inflation trends.

“The strategies themselves are fairly straightforward – global macro and long/short equity are very common strategies. But the way we manage them in the strategy is quite unique – a fairly unique machine learning element is introduced in the pattern recognition to enhance accuracy,” Sandquist tells Hedgeweek. 

“The tactical asset allocation strategies are mainly long-only, focused towards commodities, emerging markets, and other assets that are not correlated to western stock markets.”

A hybrid approach

Sandquist co-founded Swedish systematic hedge fund Lynx in 1999 along with Jonas Bengtsson and Svante Bergström. He departed the long-running firm in 2015 to focus on managing his own money within a family office structure, before co-founding Antiloop with Svahn.

“Having done the systematic approach, I felt I wanted to try something new – so I retired to manage my own money,” the hedge fund industry veteran recalls of the firm’s origins. 

He later met Svahn in 2016, with whom he shared similar ideas regarding central banks and macroeconomics.

“I had built this tactical asset allocation trading model, looking at countercyclical markets, where I was allocating between soft commodities, the S&P 500, and gold,” says Svahn, who before co-launching Antiloop had managed discretionary portfolios for high-net worth individuals trading her proprietary Cygnus asset allocation strategy. 

“I saw people shorting the stock market and losing a lot of money  I felt maybe instead of shorting one market, you could be long other markets,” she says of her investment style.

After pitching the idea to Sandquist over lunch in 2017, the pair co-established Antiloop, bringing together a range of markets and asset classes, using both quant and discretionary trading techniques, into one vehicle.

“I have a background in the quant world but have always wanted to try a more hybrid approach using discretionary analysis as well,” Sandquist observes.

“When I was at Lynx, some people thought we were crazy for letting the computers make all the decisions. Now it’s almost the opposite  the pendulum has swung the other way. But I’ve always felt there are merits to both approaches.”

Each of Antiloop Hedge’s four approaches consists of two investment strategies each, making a total of eight strategies in the fund altogether. 

Tactical Asset Allocation is made up of an emerging markets and a developed markets strategy; Global Macro consists of a discretionary and a systematic strategy; Long/Short Equity is split between technical and fundamental strategies; and Short-Term Trading boasts a short-term futures and a short-term equities strategy.

Sandquist manages around 50 per cent of the risk within the firm, and is responsible for Antiloop’s Global Macro portfolios, Tactical Asset Allocation Emerging Markets, and Long/Short Equity Technical. Anna Svahn oversees the Tactical Asset Allocation Developed Markets strategy, and portfolio manager Karl-Mikael Syding manages the Long/Short Equity Fundamental portfolio.

“The fund is composed of eight strategies, but they’re eight strategies that all work very well together and hedge against each other very well,” explains Svahn. “The goal of the fund is to have a low correlation to the stock market, but it is also designed so that the eight strategies have a very low correlation to each other.”

‘Bumpy ride’

While Antiloop has a global macro focus, blending discretionary and quant investing across an assortment of assets and markets including equities, futures and commodities, its sizable focus on commodities is what ultimately sets it apart from other funds, especially in the Nordics, notes Svahn.

Despite the broader trend of rising commodities prices over the course of this year, the pair acknowledge the challenge of ongoing volatility within those markets.

“That’s the way commodity cycles are – they are much harder to trade than bull markets in stocks or bonds,” says Sandquist. “But that’s also something where we feel we can offer added value as an asset manager in the next few years. This bull market in commodities is just starting to take off now, but it’s going to be a very bumpy ride along the way. We have seen, for example, lumber prices go up extremely high and then collapse. Hopefully we can manoeuvre this period very well.”

Svahn adds: “If I had to describe us in a single sentence, it would be that we hedge against inflation through commodities. Commodities markets are volatile  there are short-term price signals and more longer-term cycles that impact the prices. But it’s important to realise that although commodities are often bundled together in one category, in reality lot of them are uncorrelated to each other. My biggest focus is agriculture and soft commodities, but I’m also looking into precious metals and aluminium and uranium.”

Market mispricing

Building on this point, both Sandquist and Svahn believe that while stocks and bonds have been at the core of investors’ portfolios over the past decade-plus, the markedly different oncoming inflationary regime will require more ‘inflationary-protection’ assets, such as commodities.

“The whole narrative now is that the central banks have the tools which means if inflation gets out of control, they can just raise rates and everything will be fine. That’s total nonsense,” Sandquist observes. “I think people are totally underestimating central bank’s ability to control this inflation genie that they’ve let out of the bottle.”

He adds: “This has caused enormous mispricing in markets, mainly in terms of precious metals, gold, silver, and other commodities, as well as mining stocks, for example, which are massively underpriced at the moment.

“When this perception starts to change, and people realise that central bankers are boxed into a corner and can never tame this inflation without collapsing the system because it’s so leveraged with debt now, that will be big trend for years going forward.”

Gold has also been a key area of focus, with the sector markedly underperforming over course of the pandemic. 

“Our tactical asset allocation strategies are biased towards precious metals and gold. I think gold is in a secular bull market, but for more than a year now gold has been in a bear market or a correction, which is not great for those strategies,” adds Sandquist. “But this is a very good time to launch the fund – I think we will see new highs in the price of gold pretty soon.”

Antiloop currently has USD50 million in committed capital from Sandquist and two other entrepreneurial allocators over the past few years. The strategy is primed to roll out during the fourth quarter, with a return target of between 10-20 percent per year.

“Since we expect inflation to play a pretty big part in the macro environment going forward, I think you have to generate returns that are above 10 per cent to be meaningful, and to compensate for this inflation that’s being created now,” he explains.

“But we don’t want to be as high as typical CTAs which have around 15 percent volatility. So we want to be slightly below that, but slightly above the average multi-strategy today.” 

He adds: “If we are right about what’s coming, I think the stock market is not going to be as great as the past 10 years, and it’s going to be better to be invested in commodities.”

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Hugh Leask
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