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 under management.
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
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
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
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 funds.
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 investors".
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
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’," says
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
"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 market conditions."
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
"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
"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 hedge funds."
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."