Over the past 20 years or so, Helsinki-headquartered Estlander
& Partners has made a name for itself with its dynamic and
successful systematic trading strategies, which have plotted a
generally steady course through the often stormy waters of
managed futures and systematic macro investing.
Its funds have attracted capital from investors both
domestically and internationally, turning a once-modest
automated trading outfit into Finland's most high-profile hedge
fund firm, now on its way to the $1 billion mark for assets
With three successful hedge funds already well established,
the firm is gearing up to launch a fourth fund later this year
that will draw on its research history and provide investors
with a targeted exposure to short-term systematic trading
CEO and CIO Martin Estlander studied computer science and
economics in the 1980s, before starting out as an equity trader
and then becoming involved with trading derivatives instruments
as co-founder of options market-maker Sophos in Stockholm.
A year later, he became director of Servisen Arctos &
Partners in Helsinki, going on to co-found the firm's
market-maker on Eurex alongside colleague Kaj Rönnlund.
Around this time, the duo began developing the automated
systems and models that would later be used by Estlander &
Partners' systematic hedge funds.
After a management buyout in 1992, the firm changed its name
to Estlander & Rönnlund. For the next 11 years, the
firm's trading activities spanned both futures - Estlander's
area of focus - and options, which were Rönnlund's
During the 1990s, the firm's futures trading operation
developed and ran two systematic strategies that continue to
manage the bulk of AUM today: the quantitative multi-strategy
Global Markets Program, and the short to medium-term AlphaTrend
managed futures strategy.
"All Estlander & Partners strategies date back to 1991,"
says Estlander. "We've had a very trading-oriented culture
right from the start, with great passion for the financial
In 2003, the decision was taken to focus entirely on these
futures strategies, and the existing options business was
jettisoned. "We saw so many more long-term opportunities in
futures trading, and also in managing assets for clients,"
Estlander recalls - explaining that the firm's options business
had been primarily focused on proprietary trading.
"We wanted to purify that and make the whole thing nice and
clean, investing our money directly alongside our clients
without any portion in prop trading," he continues. "And we
also wanted to concentrate all of our research resources on
this one area: futures. We were keen to focus on one thing and
do it well."
Rönnlund left the firm in 2007 with Estlander and other
colleagues acquiring his shares - and resulting in another name
change, to Estlander & Partners.
The firm had been managing client capital in the Global
Markets strategy, while the Alpha Trend CTA strategy had been
operated via a proprietary managed account run by its
developer, Jan Haraldsson.
In 2008, Estlander & Partners began offering Alpha Trend
to investors via a pooled fund - and it has since become the
firm's largest strategy by assets under management.
Both Alpha Trend and Global Markets are trend-following
strategies. Global Markets runs a systematic multi-model
portfolio applied to commodity futures, financial futures and
FX. It uses a combination of price-based and fundamental
criteria, and combines high-frequency trading with long-term
Alpha Trend has a generally shorter-term outlook than the
Global Markets Program - and many other CTAs in general - as it
focuses on short- to mid-term holding periods. The strategy is
price-based and invests solely in exchange-regulated futures,
trading 74 markets.
Estlander describes the Alpha Trend portfolio as "very
selective and narrow" - holding up to 45 positions, and
sometimes fewer than 10. It has a distinct focus on natural
resources, with more than 40% of the portfolio invested in this
Since launching in October 1991, the Alpha Trend strategy
has produced an annualised return of 11.27%. It is up by 4.08%
this year to the end of August, compared with a flat EuroHedge
Managed Futures Index. Global Markets is down by 5.43% YTD -
far less than many other prominent CTAs - but has made 6.86%
annualised since inception in 1991.
The firm launched a third investable hedge fund in 2010,
again building on its two-decade track record.
Estlander & Partners Freedom offers combined exposure to
the two existing strategies. It is a blended offering rather
than a best-ideas approach, and gives roughly equal weightings
in its exposure to Alpha Trend and Global Markets. Since
launching three years ago, Freedom has been rolled out in a
range of investable formats, including a UCITS fund and
segregated managed accounts.
"The other funds tend to be more for offshore investors who
are looking to complement their other CTA exposures - in the
case of Alpha Trend - or who want to add more systematic global
macro exposure, via Global Markets," says Estlander. "Freedom
appeals to pension funds, onshore investors, and those looking
for more diversified systematic and CTA exposure."
Estlander & Partners currently manages around $860
million, with all three strategy approaches holding a decent
share of the total.
Alpha Trend is by far the largest by AUM, managing $496
million as of July, while Global Markets is running $217
million and Freedom holds $147 million. Despite being the
smallest and newest strategy in the firm's range, Estlander
describes Freedom as the flagship offering - a reflection of
its more diversified nature and its broader appeal with large
institutions and the growing onshore market for hedge
Estlander does not believe his firm should push one strategy
over another, and is happy for investor demand to dictate the
AUM split between strategies. He believes Alpha Trend's
successful accrual of assets to date "is partly because it is
so different from other CTAs, and that can be very appealing to
Investor appetite has been a key factor in the decision to
launch a fourth vehicle, to be named Presto, in the fourth
quarter this year. Whilst Freedom presented an expanded
offering, spanning both of the firm's existing strategies, the
new fund will be a narrowed-down proposition that gives
investors access to a subset of the Global Markets Program.
The fund will focus on the short-term trading aspects of
Global Markets, excluding the longer-term macro sub-strategies
and resulting in a portfolio of trades that will typically be
held for just a few days. The fund's name - presto meaning
'quickly' - is a direct allusion to its focus on more temporary
"We've put a lot of research and effort into developing the
platform, and into developing this strategy," says Estlander,
adding that the decision to launch the new fund was based on a
combination of opportunity set and investor demand for a
standalone short-term trading vehicle.
Presto is likely to be relatively small at launch, with the
aim of establishing an audited standalone track record before
actively targeting investors. "It's the Nordic way, and we have
a saying which is that 'Finns don't believe until they see',"
The upcoming launch is a good example of how the firm has
adapted and expanded its activities from the very beginning: by
enhancing and developing its expertise and trading processes,
resulting in new products that are intrinsically tied to its
existing strategies and approach to systematic investing.
As Estlander says, his is not a firm that broadens its reach
to encompass new and unfamiliar investment strategies, but one
that digs deeper into its own trading history to find a new way
of doing things.
An Estlander & Partners marketing presentation refers to
its 'focus on refinement rather than revolutions'. For
Estlander himself, this is fundamental to the firm's
"We don't change our strategies too much over time," he
says. "Investors can rely on the fact that we're true to our
origins. People know we will be looking for directional trading
opportunities, but that we might be doing it in different ways.
They know pretty much what we will produce, but perhaps in a
broader portfolio or with different time horizons.
"So we're all about refining our ideas, rather than - for
example - jumping into merger arbitrage and playing in that
field. And we do not believe in adapting the strategy to recent
Finland is home to a small handful of other hedge fund
outfits, but Estlander & Partners stands out for its size
and international presence. Estlander, who is himself a Finn,
believes the country is an ideal location in which to work and
reside - with many benefits for an entrepreneurial firm.
"Finland has been rated as the best place to live, for
whatever reason," he says, referring to a Newsweek ranking of
2010. The firm's marketing materials also cite the Economist
Intelligence Unit, which has name Finland as the 'best business
environment in the world' from 2009 to 2013.
"People believe taxation here is very harsh, but there are
good sides to that as well," says Estlander, referring to good
public services including an education system that regularly
receives praise internationally, and adding that business
taxation is actually very competitive.
"As a hedge fund, we've found the Finnish regulator to be
very proactive," he adds. "They are very supportive of our
business and we have a good dialogue with them. Regulation is
very burdensome, but in the long term I think it can be a
positive thing, as it brings comfort for investors. In Finland
we have had regulation for a long time, and that allows for
onshore funds. As a result, investors are used to the idea of
Since 1998, Estlander & Partners has worked closely with
Finnish universities - notably in Vaasa, where the firm houses
its operations, trading and portfolio management activities
(the firm also has client relations outposts farther afield in
Munich and Zurich as well as in the US in Stamford,
As a result of its academic connections, the 35-strong firm
has attracted high-quality local research talent over the
years, and Estlander is proud of his firm's track record of
staff retention. Employees have typically stayed with the firm
for seven years on average.
"The corporate culture we have is one of our biggest assets,
and people are quite inspired working here," he says. "We have
a very low turnover - we've not really lost any of our research
people over the years. And we have been able to attract people
to join from abroad as well."
Estlander acknowledges that systematic strategies have had a
tough time of it since 2011, with CTAs in particular taking a
hit en masse. But while he agrees the environment has been
challenging, he also sees reasons for optimism.
"Commodities have been really, really sold down, so they are
very cheap at the moment," he observes. "And volatility is low
now, which typically is a good thing for commodities and
Recent poor performance by CTAs may have deterred some
near-sighted investors, but Estlander believes the time is
right to be invested in such strategies - noting that managed
futures funds are generally liquid, dynamic, and able to
capitalise on up and down markets.
"If and when the world economy kicks in, commodities have
the potential to do very well," says Estlander. "Overall,
opportunities are good right now."