Back From NYC, Trader at Swedish Hedge Fund Steps on the Brakes

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  • Granit partner George says market ‘priced for perfection’
  • Says need liquidity in the portfolio during ‘greed phase’

If you want to protect your portfolio, you better go liquid.

The current market is “priced for perfection,” said Sean George, a partner and head of fixed income at Swedish fund manager Granit Fonder AB.

“It’s time to step on the brakes a bit,” George, a former Wall Street trader who has returned to Sweden to set up a hedge fund, said in a phone interview on Thursday. “I may not pull the hand brake, but gear down a bit.”

Driven by expectations of higher growth, stocks and high yield bonds have rallied since Donald Trump was elected U.S. president. The Bloomberg Barclays U.S. Corporate High Yield Total Return Index has gained about 3.6 percent since November 8, while the MSCI World Index has risen about 8.9 percent over the same period.

“In this greed phase it can turn around quickly,” he said. “Then you want some liquidity in your portfolio.”

George, who’s American and studied at the University of Gothenburg, is now setting up a new hedge fund at Stockholm-based Granit and is seeking to raise $50 million to $100 million initially. The Global Credit Opportunity fund will invest about 75 percent of its capital in high-yielding corporate bonds and the rest will be used for short-term opportunities and hedging, targeting a return of 5 percent to 7 percent a year.

The 44-year-old will use his experience as a trader at Deutsche Bank AG, Jefferies Group LLC and Bank of America Corp., where he ran credit default swap trading during the financial crisis, to profit from short-term mispricing and relative value trades.

The former kickboxer starts with top down analysis before picking companies for the income portfolio. A hedged credit portfolio offers a complement for fixed-income investors as rising interest rates sap bond returns, George said.

“There’s a big risk for reflation in the U.S.” he said. “If there’s an inflation scenario in Europe and the U.S., you have to invest in another way than with all the QE and the central bank trades during all the years.”