Protean Funds Scandinavia AB January 2026 Partner Letter

Expensive Companions,

Protean Small Cap declined by -3.6% in January. The benchmark index was down -2.5%. Since launching in June 2023, the fund has gained 61.8%. The Carnegie Nordic Small Cap Index is up 22.6% in the identical interval. All figures are web of charges.

The hedge fund Protean Choose returned -2.8% in an unsatisfactory January.

Protean Aktiesparfond Norden returned -2.3%. The benchmark elevated by 2.7%. Since inception, ten months in the past, the fund is up 17%, and in the identical interval the VINX Nordic Cap index is up 13.7%. It now manages 1.7bn SEK.

This month’s letter elaborates on the Award Curse, a decomposition of worldwide fairness administration, an rising dislocation in Nordic small caps, find out how to play the infinite sport, why we should think about Sisyphus pleased, and why we now have lowered threat however nonetheless see alternatives. Plus, as all the time, commentary on the month’s numerous winners and losers.

Thanks for being an investor!

– Crew Protean

The Award Curse

January 2026 • Written By Pontus Dackmo

Is it a coincidence that our hedge fund recorded a damaging month instantly after being named “Hedge Fund of the 12 months” for 2025 by Privata Affärer? We’re tempted to reassure all stakeholders that that is totally unrelated. Sadly, each tutorial literature and lived expertise recommend precisely the other.

Awards are, by design, backward-looking, and have a tendency to reach exactly when a technique has been working somewhat too nicely. As ability and luck are arduous to untangle on this trade, it raises the query of whether or not the efficiency that led to the award was closely influenced by the latter. And luck is, in its purest kind, sadly, not a repeatable course of. In that sense, trade recognition is much less a validation of excessive anticipated future returns and extra a mildly embarrassing reminder of imply reversion.

Virtually, for Protean, nothing about an award improves our elementary alternative set, lowers our entry costs or makes our brief positions go down sooner. If something, it will increase the danger of behavioural errors similar to overconfidence, franchise safety moderately than return optimization, and the refined strain to handle optics moderately than soberly proceed as all the time. Fortunately, we’re aware of this dynamic and think about the January drawdown not as a contradiction to the award, however a wholesome slap throughout the face.

Our course of and incentives stay unchanged. And so far as elevated consideration might result in capital inflows, we remind you that we now have been express since day one which each Protean Choose and our small-cap technique will probably be closed nicely earlier than capability turns into a constraint. That dedication predates this award and is unchanged by it. The Choose technique at present manages SEK 1bn ($110m), with a tough cap at SEK 2bn ($220m).

We view asset progress as a threat issue, not a enterprise goal, and have little interest in discovering our true capability through underperformance.

So, thanks for the award, however not a lot for the imply reversion. Maybe this can be a extra becoming image than the primary one.

A rational decomposition of International Equities

January 2026 • Written By Pontus Dackmo

Coming again to the concept of a International Aktiesparfond – an inexpensive fund that lowers the charges even additional because it grows and that may beat the index (versus costly energetic funds that don’t, and low cost index funds that may’t). Thanks for the emails, messages and conferences that had been the results of our ask for suggestions within the earlier letter.

A central recurring theme within the suggestions: we get why Protean has a (theoretical) edge in native markets, however what’s your edge in International equities? The query is totally cheap – and importantly, we don’t assume world is symmetric with how one ought to take into consideration regional or area of interest methods.

In regional markets, native data, historic familiarity, and proximity can plausibly play a task, significantly in much less environment friendly segments. In world listed equities, nevertheless, the assumptions are completely different and need to be examined moderately than carried over by default.

A typical trade perception is that world fairness outperformance is pushed by geography, organisational scale, or amassed seniority: being based mostly within the “proper” monetary centre, using bigger analyst groups, or counting on many years of expertise. If these elements had been structurally decisive, they need to be clearly seen in historic outcomes. They aren’t. There isn’t any sturdy proof that older managers outperform youthful ones, that bigger groups systematically generate superior risk-adjusted returns, or that sure places take pleasure in a persistent benefit in managing world listed equities. As a substitute, the dominant empirical commentary is convergence towards index-like returns after charges, no matter organisational setup.

This isn’t to say that world fairness administration is trivial – solely that its sources of benefit are sometimes misunderstood. In a market the place monetary disclosure is standardised, administration communication is world, and data is disseminated concurrently, proximity offers little informational profit. The related query is subsequently not the place selections are made, however how they’re made.

The elements that do present persistence within the information are decidedly much less glamorous: readability of funding course of, self-discipline in capital allocation, consistency in portfolio development, alignment of incentives, and – above all – price management. Poor capital allocation appears to be like the identical throughout jurisdictions; sturdy returns on capital are universally scarce. These realities don’t change at nationwide borders.

For that reason, we don’t want claims of native perception or informational benefit. It may be constructed by making use of a clearly outlined, repeatable framework to a broader alternative set, whereas remaining express about what the technique does and doesn’t purpose to do. The target is to not marginally outperform an index by fixed exercise, however to create situations the place sturdy long-term relative returns are doable by self-discipline, selectivity, and structural humility.

We imagine that world fairness outperformance doesn’t require bigger groups or bodily presence in particular markets. It requires a coherent course of, a rational view of uncertainty, and a relentless give attention to prices and incentives. That perspective informs how we take into consideration world equities, simply because it has knowledgeable our selections elsewhere.

The inevitable conclusion is that the defining traits of a profitable International Aktiesparfond are subsequently not geographic attain or organisational scale, however construction, judgment and self-discipline. The potential supervisor ought to assume like a capital allocator moderately than a market commentator; consider companies by money flows, steadiness sheets and incentives moderately than narratives; perceive how capital is deployed in apply; and keep a robust aversion to complexity, leverage and pointless prices. Equally necessary is the flexibility to function inside a clearly outlined framework, making use of constant standards throughout a broad alternative set whereas resisting each benchmark gravity and short-term noise.

You may say loads concerning the thought to doubtlessly launch a fund like this, with a supervisor that matches the above invoice, however you have to agree it’s an fascinating factor to spend time fascinated with.

An rising dislocation in Nordic Small Caps?

We use the phrase dislocation intentionally. By that we imply a state of affairs the place costs are now not primarily set by details about long-term fundamentals, however by flows. Capital transferring in a single path for causes which have little to do with what the underlying belongings are prone to earn over time.

We imagine such a dislocation is likely to be growing in small cap equities as an asset class. They’ve underperformed for a very long time, so this isn’t a dramatic declare. Certainly, the press and advertising supplies are filled with biased small cap managers claiming “it’s time for a small cap revenge!”. What issues is the mechanism behind the weak point, and what present costs are implicitly assuming concerning the future.

Small cap equities are structurally uncovered when sentiment deteriorates. They sit outdoors the massive indices and subsequently profit much less from the regular, price-insensitive inflows tied to passive allocation selections. When cash leaves, there isn’t any computerized purchaser. Liquidity is thinner, which turns redemptions into pressured promoting.

The impact compounds. Weak efficiency results in outflows. Outflows depress costs additional. Liquidity dries up, IPO markets shut and analyst protection thins. Fundamentals really don’t have to deteriorate for this course of to run.

On the similar time, the broader narrative has shifted in a manner that’s unhelpful for long-duration belongings. Current years have been dominated by themes of fragmentation, safety and threat administration moderately than enlargement and alternative. Expectations for the outer years have turn out to be extra cautious.

This issues extra for small caps than for giant ones. As a collective, a higher share of their worth is determined by progress, reinvestment and optionality additional out in time. On this surroundings, buyers gravitate towards measurement, liquidity and perceived security.

The result’s that small cap equities as we speak are priced at ranges that suggest a moderately bleak future. Throughout markets they commerce at uncommon ranges relative to giant caps on many valuation measures. Worthwhile, well-capitalised small corporations are valued as if long-term progress will probably be scarce, or non-existent.

This isn’t how markets often value a short-lived slowdown. The assumptions embedded in costs level towards one thing extra everlasting: constrained progress, increased threat premia and restricted payoff from optionality.

Dislocations of this sort are likely to persist longer than anticipated and resolve sooner. They don’t require a transparent macro turning level. They have an inclination to finish when promoting strain abates and marginal patrons re-emerge. Costs regulate earlier than narratives do.

From present ranges, small caps don’t want optimistic assumptions to carry out. They want expectations to cease deteriorating. Our publicity to small and mid-cap equities displays this view. It’s a strategic allocation, not a tactical place, and it isn’t with out discomfort. Small caps will stay risky, they usually could proceed to lag as flows can keep damaging for an prolonged interval.

However present pricing implies a future the place progress stalls and progress turns into a unicorn. That could be a sturdy assumption, and we aren’t satisfied it’s the proper one. Due to this fact, we’re at present attempting arduous to separate infants from bathwater, on the lookout for alternatives available in the market waste basket. All of the whereas maintaining a tally of general portfolio threat.

Protean Choose

January 2026 • Written By Pontus Dackmo

January abstract

In Sweden, which constitutes most of our publicity, the massive cap OMX30 index was up roughly 5%. This headline quantity masks a significant dispersion beneath the floor. Index management was slim and dominated by mining and defence shares, whereas the Swedish small cap index declined 4.5%. As we’re structurally chubby small- and mid-cap shares, this issues to us.

It isn’t an unintended bias. Over time, we imagine the richest alternative set – and essentially the most persistent mispricing – is prone to current itself away from the most important and most crowded shares. The flip aspect is that intervals of sharp rotations, issue shifts, or thematic hoopla are typically uncomfortable for portfolios like ours (and, in equity, others too).

Throughout the month, we lowered our place sizes and each our gross and web publicity. We ended the month with a mere 106% gross publicity and 15% beta-adjusted web publicity (each metrics additionally adjusted for money administration positions).

Lengthy positions struggling

As well as, a number of of our bigger holdings moved in opposition to us for idiosyncratic causes. A typical denominator was fund outflows and positioning moderately than deteriorating fundamentals. The market merely didn’t share the views we had been expressing by the portfolio.

Examples of shares that fared poorly embrace Getinge, which posted a robust underlying margin enchancment, but was penalized by the market and now trades at a considerable low cost to friends regardless of operational progress.

EQT, which made a strategically sound and accretive acquisition, plus posted a good set of numbers, nonetheless declined, possible as a result of flow-related points. The P&C insurance coverage corporations Tryg and Sampo each took a tumble, as US motor insurance coverage firm Lemonade introduced they’ll slash costs by 50% for drivers utilizing Tesla’s full autonomous driving, arguing it causes fewer claims and subsequently might be priced considerably cheaper. I’ve a number of points with this response within the Nordic P&C corporations. One being that it’s unlikely a big proportion of the Scandinavian automobile fleet will probably be autonomous within the foreseeable future. Not simply because pure arithmetic let you know that even when 100% of all automobiles offered from now are autonomous, it could take >25 years to exchange the present fleet, but additionally as a result of the present iteration of FSD is unable to deal with our local weather: it performs terribly in sleet and snow-covered roads, is unable to deal with our seasons with leaves and whatnot on the highway. In a completely sunny California, positive, in Stockholm, not a lot. If the a number of contraction attributable to the response displays a worry that new entrants might disrupt the mannequin, I feel the danger is exaggerated. The Scandinavian P&C market is closely consolidated, and – dissimilar to different large markets – the insurance coverage brokers play a really small function. Which means even when costs could possibly be slashed for autonomous driving, the chances are increased a brand new entrant would seize market share, versus the sturdy incumbents merely adjusting. In a couple of months, I enterprise to guess we now have forgotten all about it and as a substitute return to specializing in 15% TSR at sub 15x capital-adjusted PE-multiples. They continue to be too low cost for each their enterprise and market place.

When this occurs, there are primarily two paths out there. You may add threat, or you may cut back it. Which one you select is much less a tactical query than a philosophical one. Additionally it is extra necessary for the longevity of a hedge fund than you assume.

The 4 corporations talked about above, collectively accounted for nearly 2% of the damaging contribution throughout January. None of them make us nervous and we anticipate normalisation within the months forward.

But, our general positioning was lowered throughout January. Just because we need to take away the left tail of being utterly mistaken from the equation. We expect that is an infinite sport, not about brief time period maximization.

Think about Sisyphus Comfortable

Albert Camus ends The Fantasy of Sisyphus with the road: “One should think about Sisyphus pleased.” Sisyphus is condemned to push a boulder up a hill, solely to observe it roll again down once more, perpetually. He’s not pleased as a result of the boulder ultimately stays on the prime – it by no means does. He’s pleased as a result of he accepts the character of the duty. The pushing is the job. The repetition will not be a bug; it’s the important characteristic.

Investing, managed correctly, shares some uncomfortable similarities. There isn’t any end line. No everlasting state of being “proper”. Each place decays. Each thesis is challenged. Each market regiment ultimately morphs into its personal mirror reverse. Markets have a behavior of undoing good work, typically for causes which have little to do with fundamentals, and often at exactly the mistaken second.

If you happen to method this as a finite sport (with an precise finish state) brief time period losses demand speedy restore. Drawdowns subsequently create urgency. Urgency invitations leverage. Leverage often works. Nevertheless it additionally ends careers. The graveyard of finance is filled with very sensible individuals who had been proper, however too early, too giant, or too levered. We don’t need to find yourself there.

We consider investing as an infinite sport. The target is to not win this month, however to stay within the sport lengthy sufficient for course of, self-discipline, and compounding to do their work. In an infinite sport, survival will not be a constraint – it’s the express technique. The true failure will not be underperforming in a given interval; it’s taking selections that materially improve the likelihood of not being round tomorrow.

This attitude has direct portfolio implications. When positions go in opposition to us, our intuition is to not swing tougher to show some extent. It’s to reassess threat. To scale back publicity the place the margin of security has narrowed. To verify the price of being mistaken stays manageable. Sometimes, this implies accepting short-term ache in trade for long-term robustness. Like this month.

There will probably be intervals when this method appears to be like overly cautious. There will probably be months the place including threat would have paid off handsomely in hindsight. We settle for that. The price of taking part in the infinite sport is often watching others win finite ones.

We’d moderately hold infinitely pushing the boulder. However the true trick will not be being crushed to pulp when it inevitably rolls again down the mountain.

What labored

On the constructive aspect was our brief basket of small caps, which was the largest contributor for the month, along with our EURSEK hedge (that offset related FX losses on our non-SEK holdings). Our lengthy positions in ABB, FLS and Epiroc contributed properly, as did our brief positions in Holmen and Addtech.

Summarizing

Trying again at January in isolation, I’m uncertain if I’ve ever been mistaken this a lot in a single month – if by “being mistaken” I have a look at what share costs are saying. A number of of the businesses I view as having structural challenges and bloated valuations outperformed. Lots of the corporations I view as bettering and attractively valued underperformed.

What lies forward

All in all, we head into February with a light-weight positioning, and many dry powder to attempt to capitalise on what’s more and more beginning to seem like the dislocation we mentioned earlier on this letter. The mayhem in supplies and defence shares (it is extremely very arduous to sq. valuations, however the insanity of crowds is equally arduous to name an finish to) may nicely have peaked throughout January.

From a macro perspective there are inexperienced shoots in PMIs, information factors that recommend bettering fundamentals in client spending – in sharp distinction to sentiment indicators like client confidence. Folks may declare to be pessimistic, however precise behaviour seems barely completely different. It is going to be an fascinating 12 months. As all the time.

Protean Small Cap

January 2026 • Written By Carl Gustafsson

Protean Small Cap returned -3.6% in January. Our benchmark CSRXN (SEK) declined 2.5% in the course of the month. Therefore, the fund underperformed by 1.1%. Since launch in June 2023, the fund has outperformed the index by 39.2%. Complete efficiency since inception is 61.8% web of charges.

The fund now manages ca. SEK 890m.

January recap

The month was characterised by a poor surroundings for small caps, which suffered from a mixture of promoting strain from mutual funds in addition to estimate downgrades associated to the sturdy SEK. Whereas painful within the close to time period, this additionally creates alternatives for an agile, stock-picking-oriented fund (similar to ours).

High contributors for the month had been Arctic Falls, Xano, Midsona, Camurus and ITAB. Aside from Midsona, which reported a robust This autumn report, there was no tangible information of significance in these shares.

We had been a cornerstone investor within the IPO of Arctic Falls in December, and it carried out nicely additionally in January, and it has turn out to be our largest place.

Midsona is a Swedish provider of client merchandise, specializing in what it calls well being and well-being. Its merchandise are sometimes natural, and its portfolio consists of a variety of manufacturers which are well-known domestically, similar to Friggs and Kung Markatta. The share has been a holding of ours since early 2025, and we now have steadily elevated the place, as liquidity has been a limitation. Midsona pursued a technique of changing into a pan-European participant however overextended itself and has since endured a interval of balance-sheet strengthening (together with a rights subject) in addition to improved operational management. The latter has been a key focus for CEO Henrik Hjalmarsson, who joined the corporate in mid-2025. As management has improved, consideration has steadily shifted to the low valuation (it trades at 8x EBITA on 2026 numbers) and the significant enchancment in price ranges (margins grew from 3.7% to five.0% in This autumn). We doubt that Hjalmarsson, who has a background as CEO of Inwido throughout a profitable interval, will accept margin enchancment alone and imagine that Midsona, over the long run, might return to a extra growth-oriented technique.

Major detractors had been Ossdsign, Acast, Getinge, BTS, and Hexpol. There are all the time ebbs and flows in nanocaps similar to Ossdsign, and this Swedish provider of orthobiologics is at present affected by a cloth drawdown, which we now have used to extend our place within the portfolio.

We have now offered our shares in Addvise (tendered within the bid), Camurus and Enity. We have now cautiously began so as to add shares in a couple of beaten-down software program shares, the place valuations have turn out to be very interesting.

The portfolio holds 49 positions for the time being. The most important holdings are proven within the desk beneath.

Protean Aktiesparfond Norden

January 2026 • Written By Richard Bråse

Aktiesparfonden is a Nordic long-only fund aiming to generate above-market returns over the long run by energetic investing in value-creating corporations and charging a low charge. A charge that’s lowered additional because the fund grows, sharing the size benefits with buyers.

Aktiesparfonden has, since inception ten months in the past, delivered a 17% return, in the identical interval the VINX Nordic Cap index is up 13.7%. The fund now manages 1.7bn SEK.

Our communication for Aktiesparfonden is at present solely in Swedish, and updates might be discovered at www.aktiesparfonden.se by clicking the headline “Anslagstavla”.

Thanks on your long-term perspective and belief in our course of.

Unique Submit

Editor’s Be aware: The abstract bullets for this text had been chosen by Searching for Alpha editors.