Coeus Invest - Special Investment Fund

Funds and ETFs
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"Coeus Invest Oy is a Finnish investment company founded in 2021. The company’s founders are two passionate investors, Jens Kyllönen and @Arimatti_Alhanko. Coeus Invest Oy’s analyses, experience, and investment philosophy are utilized in the Coeus Invest GRIT special investment fund.

The goal of Coeus Invest Oy’s investment philosophy is to achieve high absolute returns over the long term, significantly outperforming the market. To achieve this, we cannot do things the same way as others. Our investment philosophy differs from others:

  • Capital concentration
  • Small and medium-sized companies
  • Home-field advantage
  • Long investment horizon
  • Passion

https://www.coeusinvest.fi/"

The year has been challenging in terms of returns: “The fund’s value decreased by 14.28 percent1 between July 1 and September 30, 2022, and by 30.48 percent2 since the fund’s inception in January. At the end of the third quarter of 2022, the fund held 11 positions, and approximately 13 percent of the fund’s portfolio was in cash. The fund’s five largest holdings at the end of the review period, in order of size, were Stockmann, Evolution, Kamux, OmaSp, and Upsales.”

In the Q3 investor letter, they described how quickly they reacted to changes in companies/the market:

"Excessive trading is not part of our investment strategy. However, an exceptional year has led us to make several larger strategic moves, each of which has been successful so far. As we wrote in the investor letter dated April 14, 2022, the Fund significantly reduced its weighting in Harvia when the war in Ukraine broke out. The Fund continued to reduce its position in the company throughout the summer, and by the time of the negative profit warning published on July 19, 2022, the stock’s weighting in the Fund was only about one percent. Immediately after the negative profit warning, the Fund sold the remaining Harvia shares at a price of approximately 25.4 euros. Since that day, Harvia’s share price has fallen by another 45%.

We mentioned in the investor letter dated July 9, 2022, that the Fund had completely sold off Remedy. Remedy’s share price has fallen by 30% since the most recent sales. Just before Tecnotree’s Q2 interim report, the Fund decided to sell all Tecnotree shares. The stock has fallen by 45% since the most recent sales.

Based on Kamux’s July sales statistics and competitors’ interim reports, we considered it highly likely that the company would issue a negative profit warning. As a result, the Fund began to reduce its Kamux holding as liquidity allowed. The negative profit warning came on August 11, and the Fund had managed to reduce its Kamux position by approximately 35%. The share price fell by about 15% with the negative profit warning, after which the Fund bought back the shares it had sold and continued to increase its Kamux holding throughout August."

Source: https://www.coeusinvest.fi/wp-content/uploads/2022/10/Coeus-Invest-GRIT-Erikoissijoitusrahasto-Q3-2022-Sijoittajakirje.pdf

I am very close to subscribing, but I would like to hear other people’s experiences and opinions on the fund. Kyllönen and Alhanko truly seem like passionate investors with the skill and courage to make good investment decisions.

Are there any fund owners here? What views are there for and against investing in the fund?

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“excess returns through concentration”
“skill and courage to make good investment decisions.”

Based on the fund’s performance, it seems that passion, a master’s degree in economics, or a poker championship do not automatically guarantee success in the stock market. Coeus Invest’s advertising claims are, in any case, inconsistent with the fund’s practical operations.

Admittedly, launching a fund that invests in hype stocks at the end of 2021 was almost the worst possible time, but one would still have expected these investment gurus to at least beat the indices. There certainly would have been opportunities, even though long-only funds suffer in a declining market. Some sectors have performed very well amidst war and inflation. The fund managers did not find these.

I do not own, nor do I intend to own. I will, however, follow with interest.

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If the investment horizon is less than a year, the fund has clearly failed. However, I wouldn’t rush to conclusions; time will tell, and they haven’t lost my trust.

What do you mean by “–the ad copy is otherwise inconsistent with the fund’s practical operations.”?

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Yeah, it would be nice to own a high-risk fund that only goes up. Unfortunately, based on his tweets, it seems Mikael Junger is the only one with that ability.

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The timing to start such a fund was indeed the worst possible, and as a result, there are indeed many small-cap indices that Coeus has beaten :slight_smile: And in fact, even a highly acclaimed and well-known “superfund” of recent years, like Aktia MikroMarkka, seems to have lost quite clearly to Coeus (MikroMarkka YTD -38%). Of course, the situation of Coeus after the end of September is not known now, so the numbers may have changed in the meantime.

But yes, nothing changes the fact that the numbers are ugly; there are no superheroes managing this fund either. However, my own portfolio has similar losses for this year, so I don’t see the need to start moralizing that “professionals should have known better.” The market has been truly brutal for this type of investment strategy, and this happens from time to time. Large returns cannot be obtained without risk and large fluctuations. The whole thing boils down to whether you trust the fund managers or not; I personally decided to trust them with a small position, as there is so much quality material from both of them on internet discussion forums.

From my perspective, the fund’s situation is actually quite pleasant, as I joined a heavily fallen fund at the turn of the month, and the first ~50% of returns come almost directly into hand without performance-based fees, thanks to the high water mark. So, indeed, I jumped in just now at the turn of the month; it was my first fund investment ever. In short, the expected return currently looks a trillion times better than at the turn of the year, thanks to the cold ride in small caps/growth stocks and indeed the freeride opportunity provided by the HWM. I see this as diversification for my own portfolio, as I don’t follow other small Finnish companies, nor do I have the interest/time for it. The guys also have a considerable incentive to dig the fund’s nose back to the surface, thanks to the very modest 0.4% management fee, so as long as their heads stay together, motivation should not need to be sought :slight_smile:

P.S. A moment ago, I received a subscription confirmation, based on which the YTD at the turn of the month was -27.5%. So, indeed, not at all exceptional given the investment strategy and market situation, and a clearly better result than many of its comparable peers, even if the figures are ugly. October had therefore gone better than I had anticipated after Stockmann’s collapse, so in order not to leave false information, the size of the freeride also decreased to approximately 38%.

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In the investor presentations and letters, there are countless instances where the words contradict later actions. Let’s take, for example, the excerpt from the Q1 investor letter as the most amusing example.

Some time ago, we were asked the following question:
“If the stock market were to close for ten years and you had the opportunity
to own only one company, which would you choose and why?”

The answer was Qt, with extensive justifications as to why the company should be owned.

A few months (!) after this, Qt was already being sold off with both hands.

Investor presentation in January 2022:

“We believe that concentrating capital in a small number of companies (8-12 companies) leads to the best outcome. This allows us to know our companies exceptionally well. We regularly interview the company’s management and its competitors. Because we are constantly up to date with the situation, we can react very quickly if new information changes the investment case.”

The fund managers thus claim that they know their investment targets better than others, but in the Q3 letter, the sale of Qt is explained:

“Is it perhaps possible that short sellers have realized something that has not yet been made public to the markets, such as Qt Group’s customers’ plan to switch to competing technology?”

So, in reality, they don’t know more about the company’s business than anyone can read, for example, from Inderes’ analyses.

Promoting a home-field advantage seems odd when global companies are being bought, some even listed outside Finland. It is claimed that investment targets are chosen with a horizon of several years, but so far, the portfolio’s content seems to change every three months.

The cornerstone of this fund’s investment philosophy appears to be a U-turn. There’s nothing inherently wrong with establishing a trading or hype/meme/momentum fund, but perhaps the promotional brochures could be written differently then.

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This is a matter of perspective, and I do understand this viewpoint as well; the fund has had quite a chaotic first few quarters.

I personally think that in investing, changing direction is one of the most important skills, and very few people are capable of it. When new information comes in, like it did with Qt thanks to the ugly negative news, one must be able to change direction if the situation demands it. And the faster it changes, the better. Coeus would already be facing significantly larger losses if they had locked themselves into one view; in that regard, they have made quite appropriate changes of direction so far.

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No offense, but boasting about sales as successes isn’t much of an achievement these days. Almost any sale has been profitable. In fact, the fund would have done best if it hadn’t been established at all. What interests me much more now are the purchases.

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By cherry-picking specific points, one can create a desired image of any situation. Clearly, this particular fund is not your cup of tea, but implying that it equates to a trading or hype/meme/momentum fund says more about your way of thinking than about the fund itself.

This year has been exceptional, and only a longer time horizon will reveal the end result.

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On the other hand, is a small-cap index the best benchmark when the second largest holding is the size of Kone in market value, and there have probably been several companies worth over a billion in the portfolio. Small-cap companies seem to be a rarity in the portfolio, more mid-caps and large-caps.

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Yes, it’s really a definitional question of what a small cap is. For example, in the US, where many small cap indices can be found for comparison, a small cap means something with a market value of roughly under 2 billion euros. Coeus’s portfolio doesn’t seem to have any larger companies than the Evolution you referred to.

But yes, whether you look at small cap or growth company indices, they have both come down equally, and these two factors are the main drivers of Coeus’s strategy. Not, of course, clearly limiting drivers, as for example, they have also invested quite heavily in Stockmann’s certain special situation. So yes, there isn’t really one direct benchmark index for Coeus, perhaps precisely for this reason the fund itself has not presented one.

And I should also note, so that we don’t have to dwell on this any further, that the problem or blessing with indices is always that you can always find a suitable comparison in every situation with which to either defend or criticize one’s own/the fund’s success. There is more than enough choice in the hodgepodge of indices to always be able to bolster one’s own opinion if desired, as I naturally did myself :slight_smile:

As I said before, the whole thing boils down to whether you trust the fund’s managers or not, and in this regard, any opinion is completely justifiable and valid. The point, however, is that wondering about a YTD -27% return is not, in my opinion, very relevant for this type of fund, given the market situation. Unrealistic demands should not be made regarding any investment, otherwise at least the very best investments will always be left undone, and with this type of fund, I think it would be unrealistic to expect significantly better results than what has been seen in this market. This, of course, does not mean that the fund cannot also perform poorly in a different market; of course it can, and that remains to be seen.

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That -27% YTD is also not relevant. The fund was only established on January 24th. My portfolio contains many of the same companies, and my own YTD was already -19.30% at that point.
Evolution was -11.5%, Harvia -26%, Kamux -11.6%, QT -30.7%.
If the fund had been in existence since the beginning of the year, its YTD would easily be 10-20 percentage points worse. So we can’t even talk about YTD because the fund hasn’t existed since the beginning of the year.

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Well, it’s not a matter of definition, because the fund prospectus mentioned (at least in the initial phase) that the fund invests in Nordic small cap companies. There are direct comparison indexes for them, there’s no need to bring the US into this.

I think it’s quite useless to look at any returns based on less than a year, but the fund is messing up badly against its stated strategy. If you believed the prospectus and the original speeches, you certainly didn’t get what you thought you were investing in. If, on the other hand, you believed specifically in Kyllönen’s abilities and his strategy, then the matter is fine. I claim that at least 95% of those who invested in this belong to the latter group.

edit: hmm, I can’t find any mention in the prospectus anymore that it would specifically be “small cap”, but only a mention of investing in Nordic companies. I might be mistaken.

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I’d be interested in those abilities of Kyllönen’s; as I understand it, he’s a very successful poker player, but in the investment world, there’s probably no success story behind him, right?

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I don’t know what was written in the founding phase, but now the strategy is described, for example, as follows:

"We also often focus on illiquid small and medium-sized companies that many larger players cannot invest in.
Our competitive field is easier to win, and even if we compete in district championships instead of the Olympics, the prize is the same.

Home field advantage. We know Nordic analysts who can often be the only analysts following these smaller companies. We also broadly know Nordic professional investors who have a large part of their portfolio in Nordic stocks and thus receive a continuous stream of new ideas, more than we can even go through."

So yes, it is now purely a matter of definition what indices and from where one wants to compare the fund. There is no Nordic, nor probably any other, index that would be directly comparable to this kind of strategy. Especially when the wording is vague, meaning that in practice, when reading the prospectus, it becomes completely clear to me that practically any case fits into the fund if it is seen as attractive enough.

But this is starting to turn into a bit of a squabble on my part, and it doesn’t really serve the purpose of discussing the fund itself. So I’ll leave this matter here.

This was a good clarification, you are right.

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Well summarized. Results are measured over a long-term horizon of decades.

By the way, @Arimatti_Alhanko’s article Quality is the Alpha and Omega, published on January 5, 2021, in Viisas Raha magazine, is an excellent read. In it, Arimatti shares his investment principles.

Laatu on kaiken A ja O - Viisas raha

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Could you, @Arimatti_Alhanko, respond to this risk and its probability?

Have you and Kyllönen committed to holding your own investments made in Coeus for a minimum period?

How much of your own funds have you otherwise put into the Coeus fund? % of wealth and % of equity wealth would already tell a lot.

I tried to find an answer to the above on your pages, but couldn’t find one. Apologies if the information was easily accessible.

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Hi. It’s great that a thread like this has been set up, and all feedback is definitely welcome :+1: :slight_smile:

We need to be a bit careful about what we comment on regarding the fund, as, like all documents show, we are not the official portfolio managers of the fund at least at this stage, but merely offer our experience and investment philosophy for the fund’s use :slight_smile:

Unfortunately, when it comes to questions about minimum time or % of wealth, I would prefer not to give a direct answer to these. Let’s just say that we certainly wouldn’t have founded Coeus Invest if we had thought that we wouldn’t invest our own money in the named fund (with GRIT added) :slight_smile: We are 110% committed to the project, and it’s certainly sensible that we are investors in the fund and have skin in the game.

As for the discussion about the fund’s risk level, absolutely, the fund’s risk level is high. This is visible in the fund documents. But it’s worth keeping in mind that many of our friends and family members are involved in the fund, which doesn’t necessarily support @Werther’s idea that we would withdraw our own assets from the fund just to run it with high risk. We aren’t even portfolio managers :wink: And if friends and family were to withdraw their assets, well, there wouldn’t be much left :smiley:

Furthermore, in this special investment fund registered in Finland, the rule is that the maximum weight of a single underlying asset can be no more than 20%, and the fund must have at least eight holdings. So, in theory, the fund could have almost 100% weight in five holdings, and a very minimal weight in the remaining three underlying assets. However, I consider this to be very unlikely to happen in practice.

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Thanks for the response!

It’s a shame you don’t want to answer the points above. An advantage of a small fund could be the transparency of the two of you regarding ownership stakes and minimum time. I partially understand why you won’t disclose these, but unfortunately, it doesn’t increase trust.

I’ll continue to consider a possible investment, and the fund is now on my watchlist in any case. I hope you follow this thread and, when appropriate, comment in the future as much as you can and wish to :slightly_smiling_face:

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I agree that, especially for this fund, it would increase willingness to invest (including my own money) and interest if the founders openly stated how much of their own money they have invested in it. On one hand, I understand a certain level of privacy, but on the other hand, it also raises questions when they have previously been relatively open about their euro-denominated returns. I recall that in some Seligson active fund or PYN fund, the portfolio manager’s own financial investment was sometimes itemized.

If I understood Kyllönen’s own blog correctly, about 4 million was raised to 12 million over the years. Taxable income in 2021 was “only” 683,466 euros, so I would assume that the old portfolio has been liquidated and invested in this fund.

However, the costs are high, so a certain level of transparency would certainly help many of us wavering investors to make an investment decision. The fund appears to me as a kind of mysterious fund managed by two seemingly talented guys, so what better selling point than to tell how much of their own money they have put into it (and thus previously made).

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