RHENMAN GLOBAL OPPORTUNITIES L/S BACK TO BASICS

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1 FEBRUARY 2018 RHENMAN GLOBAL OPPORTUNITIES L/S BACK TO BASICS A global long/short equity fund able to invest in all sectors around the world. Fundamental portfolio management by a portfolio manager with almost 30 years experience of the finance sector. The portfolio team supported by the renowned Advisory Board. Global Long/Short equity fund with a long bias over a business cycle. Typical net exposure of 50 % to 90 %. Active selection of regions and sectors, regardless of index single stock positions, preferably in larger companies. Investment horizon for long positions of 2-4 years, short position horizon of 6 months to 2 years. MONTHLY UPDATE The stable upward trend that we had become accustomed to in stock markets around the world came to an abrupt halt at the beginning of February. Apprehension and rising inflation sparked a dramatic drop in share prices early in the month and most of the major stock markets plunged by nearly ten percent in less than a week. To a large degree technical circumstances were to blame for the magnitude of these falls. The VIX index, which is a key measure of market volatility expectations, had been falling for quite some time, thereby attracting many investors who were expecting this trend to continue. However, once the markets had become volatile, the index took a sharp upward turn, resulting in major sell-offs and losses on instruments linked to the VIX. But, the instability also led to automatic, massive reallocations, with investors shifting funds out of the stock market and into other asset classes. During the remainder of the month, stock markets settled down and, measured in local currencies, more than half of the early-february losses had been recovered by the end of the month. Measured in EUR, the world index fell by 2.7 percent. The corresponding figure in USD was 4.4 percent. However, due to a significant drop in the SEK currency, the world index measured in SEK actually rose slightly in February. Otherwise, company earnings reports for the fourth quarter 2017 came in generally strong. US companies, in particular, reported high earnings and sales growth, in part stemming from the devaluation of the USD currency last year. European companies, on the other hand, experienced some currency-related headwinds. Nevertheless, overall, they reported satisfactory results. Perhaps the most striking feature in February was the persistent upward trend of certain companies in the technology and consumer discretionary sectors. Amazon and Netflix hit all-time highs, Continued on the next page Rhenman & Partners Asset Management AB is under the supervision of The Swedish Financial Supervisory Authority (Finansinspektionen) as of February

2 up approximately 30 percent and 50 percent respectively this year. Otherwise, February was a weak month in most sectors, particularly energy and consumer staples. Financials recorded a small increase, in part due to rising interest rates. FUND PERFORMANCE Measured in its main share class, RC1 (SEK), the fund fell by 3.5 percent. Banks and technology companies, in particular, were the main contributors, while energy and consumer discretionary negatively impacted the return. The fund s long positions dragged down the return by 2.2 percent as did its short positions, by 1.3 percent. Ericsson was one of the fund s strongest contributors in February. The company s shares rose following the Mobile World Congress in Barcelona, where CEO Börje Ekholm explained how Ericsson intends to increase revenues during the transition to 5G. More positive news came with the announcement that Ericsson had signed agreements to build 5G networks in USA, Asia and Europe. The Asahi Group was another positive contributor to the fund. Despite conflicting forecasts from analysts, its stock climbed following news of an expected increase of nine percent in the company s operating profit for Both product diversification and international expansion are to compensate for an otherwise shrinking domestic market. The fund s holding in JP Morgan Chase also made a good contribution in February. It is the largest bank in the United States and has benefited from a growing US economy, with improved lending, a stronger capital position and greater market share in investment banking. All of this attracted investors and the bank is expected to perform well during 2018 with tailwinds from a healthy US economy and rising interest rates. Fund performance suffered from the short position in Netflix during the month as the stock continued to perform strongly. Investors reacted positively to news of the details surrounding the company s plans to spend billions on streaming content, even though it will have a negative impact on cash flow for the foreseeable future. Holdings in both Halliburton and Exxon Mobil also dragged the fund down in February. The stock prices of both companies plunged early in the month, which was attributable to the decline in crude oil prices. That in turn resulted from an increase in US crude supplies. The US is expected to produce a million more barrels per day in 2018 compared to last year. Volatility in the stock market has clearly put a damper on risk appetite, causing many investors to move funds into other types of asset classes. FUND PERFORMANCE - RC1 (SEK) NAV Aug-16 Nov-16 Feb-17 Maj-17 Aug-17 Nov-17 Feb -18 FEBRUARY 2018 SHARE CLASS NAV MONTHLY RETURN YTD SINCE INCEPTION 1 RC1 (SEK) % -4.41% 3.24% RC9 (SEK) % -4.20% 5.11% IC1 (EUR) % -6.90% -5.11% 3 month Euribor (EUR) % -0.05% -0.48% SHARE CLASS CHARACTERISTICS INSTITUTIONAL SHARE CLASSES (ONLY INSTITUTIONAL INVESTORS) MINIMUM INVESTMENT MGT. FEE PERF. FEE ISIN NUMBER BLOOMBERG TICKER LIPPER REUTERS TELEKURS IC1 (EUR) 100, % 20 % LU RGLOPC1 LX IC1 (SEK) 1,000, % 20 % LU RGLOPI1 LX SHARE CLASS CHARACTERISTICS RETAIL SHARE CLASSES (ALSO OPEN TO INSTUTIONAL INVESTORS) RC1 (SEK) % 20 % LU RGLOPR1 LX RC9 (SEK) 2,500, % 20 % LU RGLOPR9 LX Administrative fees are charged in addition to the fees above. Further information is available in the KIID as well as the prospectus (part B, B14-18). Notes: 1 Please find launch date information on page 4. 2

3 FORECAST The year got off to a good start in 2018, but it was short-lived and stock markets around the world have since become increasingly volatile. Despite the favorable outlook for the world economy and the high earnings that companies are reporting, there are doubts about how sustainable the profit growth of the last few years will be going forward. Add to that the announcement by President Trump after month-end to introduce tariffs on steel. Although this may just be a negotiating tactic, it nevertheless fuels uncertainty and signals that we are heading for more protectionism in the world economy. The fund managers adverse feelings towards some technology companies have certainly put the fund to the test. Most of its poor performance this year is attributable to this alone, not only as a direct result of short positions but also the fact that the fund does not hold stocks in the companies that have contributed most to the market s overall development. It is worth pointing out that this pessimism does not stem from a negative view of technological progress, but rather, from the perception that the current views on some of these companies do not fully recognize that increasing competition is certain to develop in such areas as online shopping, electric cars, smartphones and video streaming. We are, however, optimistic towards sectors that are benefitting from continued growth in the world economy. These include industrials, banks and energy companies. We consider the profit outlook in these sectors to be good, which, with reasonable or even low valuations creates room for price increases. KIID AND PROSPECTUS (WEBPAGE) RhenmanPartnersFund/ INVESTABLE CURRENCIES Euro (EUR) / Swedish Krona (SEK) RETURN TARGET Annualised net returns of +7-8 % over time LEGAL STRUCTURE AIF / FCP (Fonds Commun de Placement) under Part II of the Luxembourg Law on Investment Funds PORTFOLIO MANAGER Rhenman & Partners Asset Management AB HEAD OF INVESTMENT TEAM Staffan Knafve FUND CHARACTERISTICS CURRENCY EXPOSURE 2 AIFM / MANAGEMENT COMPANY SEB Fund Services S.A. PRIME BROKER Skandinaviska Enskilda Banken AB (publ) DEPOSITARY AND PAYING AGENT Skandinaviska Enskilda Banken S.A. AUDITOR PricewaterhouseCoopers (PwC) SUBSCRIPTION /REDEMPTION Monthly MINIMUM TOP UP No minimum NOTICE PERIOD 3 working days HURDLE RATE Euribor 90D (high-water mark) USD 40 % EUR 18 % CHF 13 % JPY 12 % HKD 8 % Other 8 % PORTFOLIO CONSTRUCTION 7 PYRAMID LEVEL POSITION SIZE NO. High conviction 3 %-10 % 23 Core holdings 1 %-3 % 6 Fractional positions 0.5 %-1 % 0 Candidate holdings 0 %-0.5 % 0 RISK (RC1 SEK) Value at risk % Standard Deviation % Sharpe Ratio EXPOSURE 6 Long 105 % Short 15 % Gross 120 % Net 91 % AUM 3 Fund: EUR 13m USD 16m Firm: EUR 571m LARGEST LONG POSITIONS 1 JPMorgan Chase & Co 2 BNP Paribas SA A 3 Volkswagen AG 4 Asahi Group Holding Ltd 5 Exxon Mobil Corp Notes: 2 As a percentage of the market value of the long and short positions (excluding cash positions). 3 The AUM is adjusted for fund inflow at month end. 4 For holdings at month end (95% conf. int. 250 days history). 5 Standard deviation and Sharpe ratio are annualized. 6 The exposure is not adjusted for net fund flow at month end. 7 Number of long equity positions (excluding any ETFs). 3

4 HISTORICAL RETURNS AND NAVS RC1 (SEK) NAV YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC RC1 (SEK) PERFORMANCE %. NET OF FEES RC9 (SEK) NAV RC9 (SEK) PERFORMANCE %. NET OF FEES IC1 (EUR) NAV IC1 (EUR) PERFORMANCE %. NET OF FEES

5 ABOUT RHENMAN & PARTNERS Rhenman & Partners Asset Management, founded in 2008, is a Stockholm-based investment manager focusing on two niche funds administered by SEB Fund Services S.A.: Rhenman Healthcare Equity L/S, founded in 2009, and Rhenman Global Opportunities L/S, founded in Assets under management amount to approximately EUR 500m. Investment Teams of both Funds are in their investment processes supported by renowned Advisory Boards, including professors and experts with many years of market experience and extensive networks around the world. LEGAL DISCLAIMER Rhenman Global Opportunities L/S. The Fund is not an investment fund as defined in the European Union directives relating to undertakings for collective investment in transferable securities (UCITS). Legal information regarding Fund is contained in the Prospectus and the KIID. available at Rhenman & Partners Asset Management AB (Rhenman & Partners) webpage: This material has been prepared by Rhenman & Partners for professional and non-professional investors. Rhenman & Partners when preparing this information has not taken into account any one customer s particular investment objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are not intended to represent recommendations of particular investments to particular customers. This material is for informational purposes only and should not be construed as an offer or solicitation to sell or buy units the Fund. Investors is strongly recommended to get professional advice as to whether investment in the Fund is appropriate having regard to their particular investment needs, objectives and financial circumstances, before investing. 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SUBSCRIBE TO OUR MONTHLY NEWSLETTER AT CONTACT DETAILS Rhenman & Partners Asset Management AB Strandvägen 5A Stockholm, Sweden Tel info@rhepa.com International investors (non Swedish): Carl Grevelius Head of Investor Relations Tel carl@rhepa.com Swedish investors: Anders Grelsson Swedish Investor Relations Mob anders@rhepa.com