Dodging Tariff Turmoil in Nordic High Yield Credit | Måns Levin of Ridge Capital
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Some of these Nordic companies, they are not as affected by these tariffs as you might think. The bigger companies in the Nordic region are, but the smaller ones, not always. And then also due to the liquidity in this market, it's a bit of a lagging market. So you might see spread widenings in Europe or US, but we see nothing here.

I want to do a quick disclaimer that nothing we say here is investment advice as well. Nothing we say is marketing or advertising for Ridge Capital or any of their funds. Everything is meant to be informative about the fund management industry. Welcome to Other People's Money. I am joined today by Mons Levine, CEO, portfolio manager, and co-founder of Ridge Capital, a Stockholm-based credit fund

focused on the Nordic high yield market. They've annualized an exceptional 18.4% and gathered over 200 million euros in assets since their launch in 2023. Mons, thank you so much for joining us today. Max, thank you for having me.

All right. Well, look, let's start with the biggest question, which is why is the Nordic high yield market a place where you can find, you know, high teens returns over these last few years? We are hearing all about private credit getting into the sort of low teens, and that is the asset class du jour. And here you guys are in the high teens. What's going on up north in Europe?

It's an interesting place to look at. And why? I mean, for me, it's an imperfect, inefficient and a bit illiquid market. It's a rather small and young market. It really started to grow after the financial crisis. And now for today, it's approximately a market of 60 billion euros. So like 10, 15% of the total European market. But I mean, Nordic high yield, it's lucrative, often overlooked market.

But if you're aware of these challenges that I just said, I mean, you can really get those extra returns. So I think that's why we think it's very interesting. Going back to what are the challenges, perhaps it would be interesting to know.

I mean, it's a credit friendly market, but you get more returns than, for example, European high yield or US high yield. We talk about like 200 bps more in spread with very low volatility, actually lower volatility than for US or European high yields. Better returns, lower volatility. What's the catch? It's a bit illiquid. So you really need to be able to handle the liquidity.

I mean, furthermore, what I find interesting because I've been building portfolios my whole life is that the correlation is very low. It's approximately 0.1 between Nordic Hygiene and European equities. Whereas, as you probably know, US Hygiene use equities or European Hygiene, European equities is like 0.6, 0.7.

So that's another thing. And then if I may add two or three more things, it's a floating rate market. So the interest rate sensitivity is very low, low duration. So you can really focus on the credit risk and that's what we are quite good at. But it takes a lot of work, of course, as well. And yeah, so we think it's a great alternative to classic high yield or private debt or even equities.

200 basis points, while that is certainly meaningful returns in the credit world, that doesn't necessarily make up the spread between your returns and the returns of US credit or European credit. So clearly there is some price appreciation and looking at credits that are trading at attractive prices. Let's say we have three ways of making money.

I mean, you have the performing credit, you buy a nice bond, you collect the coupons, everyone is happy. We do a deep dive credit analysis, but everyone can tell you that they do the same. But then we're also very active in the secondary market. So we really try to find interesting cases. And sometimes you can find a lot of cases where you can buy something on 80 or 90 cents of the dollar that we think is very attractive. And then you have the pull-to-par effect.

And let's say that these bonds on average have like a three, four years tenor. But if it goes from 90 to 100 within one year, then the IRR becomes very, very attractive. And then you also have

what we call event-driven trades. So we see a catalyst that we think might happen that people have overlooked. And if you find that one, you can also make a lot of money. How do you think about layering sort of sub-strategies, evolving those sub-strategies and developing new ones as the market evolves while avoiding style drift? We have this

free sources of returns. And I think

performing credit or just buy bonds when they are issued. Everyone can do that and it's a foundation for us as well. Sometimes we do that a little bit more, sometimes we do that a bit less and depends on what comes to the market. But buy the right bonds and collect the coupons. That's something we do and I would say most other people do as well.

But then to buy bonds in the secondary market at a discount, sometimes one sector has really come down. I mean, real estate, for example, a few years ago, and then you could pick the best companies that we think would perform the best or be less risk with and still make quite good returns. And it's changed. I mean, I think our

Price in the portfolio a bit more than one year ago was a bit less than 90. Now it's around 100 par. So then, of course, these blowouts in different sectors, we can't find that today as easy as we could then. But you always have single names that you could look into. So I usually tell investors that our dream or not dream, but future

You can expect us to look where the newspapers have, if they've written a bad article about a company that's usually quite good, then we will look into that bond because then the price might have come down. But for us as a bond investor, it really makes sense.

And I think last year we could find extremely many of these cases and this year a bit less. But I mean, let's see what happens. This is brightening as we speak and also in a few weeks time. And then, you know, there might be a big sell off in a sector or there might be many, many names to choose from.

And what we have done and what I would recommend anyone looking into the Nordic High Yield is to really do the analysis of a company. You really think this is interesting, but then if the price is wrong, you keep it in the watch list.

Then all of a sudden, a retail investor or someone wants to sell off or the outflows from these big usage funds that forces them to sell. Then you have done your analysis, you double check the estimates and now you can buy it at a discount, then you buy it. And that's always something we have a lookout for, especially during summer times, for example, you can find this kind of very strange stuff.

opportunities that we love. Is that just the European proclivity to sell in May and go away? It's actually quite fun. This market, the Swedish midsummer, that's in June. I would say one week after midsummer, it closes a bit down. We don't close. I mean, we're

We always work and I love working. It's the best thing I can do. It's like vacation being at work.

Some of the traders go on vacation and some of the other big fund managers, they also go on vacation. So it's a bit more inactivity and even more illiquid. Then there are some Nordic Hallyu names that are bigger issues. And then they are, of course, traded much more often. But the smaller ones can be relatively stable.

Yeah. You mentioned that you like to, you know, if there's a bad article in the press, what is the financial press for your region? Are these just Financial Times or is there a specific financial press that's popular in Nordic countries that maybe we haven't heard of here in the US if we're not as... Exactly. Financial Times, of course, they cover the larger issuers. So one of our best trades was, for example, in a...

real estate company called Heimstaden and Financial Times was all over it. And they write so bad articles as well as they did locally in Sweden in our biggest business paper called Dagens Industri. And it was so much blood on the street. But if you really did the analysis and you really made sure not to be

take away the feelings and just look at it as it was. We thought it would look good and we were quite outspoken about it. And I think we made three or four times our money on some of those trades. Yes, so we understand what kind of potential there is in this market.

We're recording this here on Tariff Day in the United States. We haven't talked at all about macro risk and the sort of just broader market risk that can come from, you know, the elephant in the room that is the U.S. market and our financial conditions. They obviously affect financial conditions all over the world.

So how focused are you as somebody who loves to get into the individual credits and find good things? How focused are you on the macro and these other market risks that, you know, don't necessarily show up when you're analyzing an individual credit?

Exactly. I think we don't have to be macro guys. We're not, but obviously you follow what happens. We're very good at analyzing individual companies and looking at credit risk and make sure we get our money back. And some of these Nordic companies, they are not as affected by these tariffs as you might think. The bigger companies in the Nordic region are, but the smaller ones

Not always. And then also due to the liquidity in this market, it's a bit of a lagging market. So you might see spread widenings in Europe or US, but we see nothing here. And yeah, there's pros and cons with that, of course. Let's say other risks we see

I mean, the credit and default risk is more of individual names. So it has nothing to do with Mr. Trump. The liquidity risk is what it is. We already discussed it. You have the FX, of course, but we've decided to just hedge away all the FX risk to make it a bit more clean. And then some people want to play around with the ratio. We could, but, you know, are we the best at, you know,

trying to guess where the interest rates are going. I'm not sure about that. But one thing we do and one thing that we carefully monitor is to watch out for large drawdowns because we use leverage. And if you have really large drawdowns, think COVID, think the financial crisis with leverage, you want to watch out for margin calls, right?

And our portfolio could handle twice the drawdown of the COVID. Yes, so you understand kind of how serious we are about this. But we also buy put options on the most liquid high yield index in Europe called ITREX crossover. So after the money put option. So if we have this big market crash that might happen today, who knows?

Then at least we sit as an insurance. We get some money back on that that will help the portfolio because we are not a market neutral strategy. So if there's a market crash or Putin hits a button or something, we will go down. But the idea is not to go down as much as peers. Finland is probably in the Nordic region, maybe the most exposed to that particular Russian risk.

Obviously around the time that you started, that was certainly top news. Did you see geopolitical risks start to show up in Finland? I mean, we're from Sweden, so we're a bit in between. But yeah.

we were well aware of the country east of us, to say the least. So we haven't seen anything on individual names. But of course, there's always a risk, especially if US decides to do something

being less involved in NATO, for example. But what has happened recently in Europe and Nordic region, as you might have seen, is that all individual countries have actually started to take this more seriously. And personally, I think that's a great thing that we make sure to be able to protect ourselves. And there's large spendings now in increasing the defenses. So far,

even though it's a tragedy what has happened in Ukraine. But I think we are starting to get more prepared and it's on every DIVNER conversation is about this, I would say. Okay. Well, enough talk about risk. Let's turn to something a little bit more upbeat and opportunity. So what are the opportunities that you think are most interesting right now? Are there particular sectors? They are

great investments or trades to be done in the secondary markets. There are not as many as it used to be, but we see a lot of interesting names and we also see some big catalysts that we think might come up during the year. But I mean, if you just receive this quite boring contractual returns with the leverage, you get double digit returns, net.

And I mean, why shouldn't that be interesting to most investors? So we think this has a place in most portfolios if you can handle the illiquidity. If you cannot handle the illiquidity or monthly traded, then you should look somewhere else. But if you like rather high returns and rather low volatility and rather low correlations,

correlation, this is a market you should look at. We haven't talked too much about distressed. Do you play in anything that looks distressed? And are you looking at things where you're looking at the covenants to make sure you're protected and looking at the asset bases? When you're thinking about these credits that maybe have a higher default risk, is that something that you'll play? And what do

What do you need to have on the protection side to step into a situation like that? We don't actively seek distressed situations, but you really need to be prepared to come into a distressed situation. And you really need to have the skills to look at the prospectus and look at the covenants and know what to do. And I mean...

my business partner had been doing this for more than a decade now and then one of his former strategies was to you know

through the stress credit, take over companies and take over the keys. You need to be able to do that. Otherwise, it's very easy just to kick the can down the road and kick the problem in front of you. Because if you sit there with the company, really need to make them understand that you are serious and you want your money back.

And not, which is much more common in UK and the US, but you would be amazed that it's a bit different in that it's a bit of a kinder approach in the Nordic region and everyone are a bit more polite and they let each other speak and there are no legal counsel involved and there are no threats, etc. But we think you need to be a bit more American, so to speak, in the approach.

Okay, so are you known for having sharp elbows in your country? Hopefully, if you ask our colleagues here in the Nordic region, they think we are team players. But no, yes, we take our targeted returns very seriously. And if you're going to reach these top returns, you need to

be able to work a bit harder and be a bit more disciplined and maybe a bit sharper elbows than the rest. Not always, but sometimes. What would happen if you do take over, you know, you do end up on the equity side? We have a mandate, so we can own equity and you need to have. But you will be amazed that some of the players in this market, they are not allowed to own equity. So, but then everyone know that they need to kick the can down the road or sell.

But for us, it's of course important that you live as you preach and that you can actually take over the company if needs be. It's very time consuming. So it's not a situation where you actively seek, but you need to be able to handle it. And another important thing is that if you find yourself in a default or restructuring situation,

doesn't always have to be bad. It depends on what you bought the bond for. And the recovery rates are rather high in this region. So if you bought a bond for a certain price and the recovery is quite high, you're able to renegotiate the terms. You can actually come out a winner. That's something, that's a role we usually would love to take. And yeah, we are fair, but yeah.

Yeah, a bit sharp elbows sometimes. As you said, you're targeting double digits, but it's not quite as high as you guys have done. Obviously, investors, they tend to anchor themselves to the recent past. So how do you deal with your current investors and talking to prospective investors who see what I see? I found your fund combing through fund database and looking for funds that had attractive returns, steady returns, and

And I was like, wow, these guys must be interesting. Let's get them on the phone and see if maybe they want to do an interview. I'm sure people find you the same way and you have to say, well, this period has been good to us and it might not be as good moving forward. How do you deal with the anchoring bias that comes from early success? We started back in 2022 and the fund started

The strategy was launched in January 23. So in retrospective, that was a great timing for high yield. I mean, you could buy bonds at a discount, which is obviously good if it goes back to par. And between 23 and 24, spreads were quite wide. So given the spread tightening that we have seen in the last years, then that has obviously helped us.

So let's say half of our performance from last year, for example, was due to just collecting coupons.

avoiding defaults, making good decisions. And half was good trades or the pull-to-par effect. And for us now, in interviews such as this, I'm very crystal clear that our yearly return is some kind of risk-free rate plus 7% over a cycle per year. So that means last year was a bit very, very good.

We cannot promise our investors that we will deliver these kind of returns every year, but we have probably the highest return target amongst all our peers.

For now, I think we have approximately 1% coupons coming in, including leverage every month. So of course that helps us in reaching our yearly target returns. You speak about your peers. I haven't found too many Nordic focused credit shops. So who are the people that you're trading against?

or who you're competing with. Exactly. I mean, this market, this small niche market, there are no ETFs. There are no passive index funds. You have the USIT funds, which is a European phenomenon with daily liquidity that offers a better liquidity than you can find in the market. So we think that's a bit strange. And then you have the banks, of course, that have everything from discretionary mandates. You have foreclosures.

large family offices that also buy bonds and own direct clients. But there are no JP Morgans or Goldman Sachs in this kind of world. You have to be careful what you say, but I think there's more competition in other parts of the world in this space.

But on the raising capital side, there are a bunch of people who are looking for long, short equity funds or private credit or whatever. And so the top of funnel for finding new investors is much larger. There's not many people out there who are like, hey, we need to get some Nordic high yield on the books. So you kind of have to get it in front of them. And you also probably have to educate them a lot on the market

Oftentimes, these strategies where you're playing in a niche place, that's actually one of the problems. So can you speak to me about the education process and trying to get people to understand why Nordic High Yield provides this opportunity? We made an early decision that we will take time to meet all our end investors and educate them if needs be. And we think that's a great opportunity.

It's a great investment to do that, to meet with investors, understand what they want and understand their needs, but also being able to communicate directly with them. It's much easier. Short term, it's a bit painful. Long term, we think it's a great game plan. And it's extremely important for them to understand

the pros and cons with the markets because there's no free lunch in finance. And I also find it that people want to place us in a bucket or they want to know, are you only fixed income or is it credit or is it credit hedge fund? What is it? And I mean, we're like a Nordic agile company

credit hedge fund with a twist, I usually say. So if that's something that fits into your alternatives bucket, that is fine. Or if it fits into your fixed income or credit bucket or maybe a liquid debt bracket, that is another thing. But yeah, we spend a lot of time meeting with investors, educating them about the market.

Well, one of the misconceptions that I think I had at the outset was I assumed that there was just going to be a ton of energy related exposure in the fund and just in the addressable market of Nordic high yield credit. And I was surprised to find that that wasn't really the case. I mean, is that really the big one for you? And can you speak to what the market looks like?

Exactly. The market is much more than just energy and real estate. I remember it was one and a half year ago, we went to Switzerland. That's in the middle of Europe. We spoke to very professional and institutional investors. And they told us, you own this and that company or you own anything in real estate. And we said, yes, we think it's a great opportunity. And we were a bit contrarian. And then they said, oh, that sounds scary.

But there are many sectors to choose from, but we're more of a bottom-up player. So if we see an interesting bond company that we can buy at a good level, then we'll add to that sector. It's not that we say we exclude real estate or whatever. So yeah, many sectors to choose from and we have a focused portfolio.

Usually not more than 25% in any sector. I think that's quite good and not more than 10% in one single name to decrease the risks a bit.

And then one sector that we avoid is oil and gas. And the reason for this is it has to decrease some risk because the probability of defaults in that sector is approximately five times higher than if you exclude it. And if you want oil and gas exposure, buy some stocks or get some other exposure, maybe not through high yield.

And it looks very good until it doesn't look very good because the oil prices go down and then if there are great cash cows with great cash flows, when the oil price is high, as soon as the oil price goes down, it becomes a bit cumbersome to say the least.

Yeah, well, let's talk about that. It looks good until it doesn't because that's a credit problem overall. Like the one year sharp of European credit is over three. The two year sharp is over is over three as well. But the five year sharp is below one. So.

everything in credit looks good until it doesn't because defaults, illiquidity, they tend to cluster around each other. And, you know, you can, you can wipe out a lot of the return very quickly if you are caught in something that you can't get out of. So, um, you know, it's a problem for every credit manager. What are you guys doing to make sure that, you know, you don't, uh,

Look like the chart of the life of a turkey here is what we say on Thanksgiving.

It's a different mindset, credit and equity investor. We have a limited upside and full downside. And for us, we don't like if a company wants to build five new, you know, or want to expand and let's say try to threefold their revenues in the short term or build a new factory in Asia or something like that. We just want our money back.

And the cash flow is extremely important. And to make sure to follow up all the time with these companies to make sure that they deliver on their promises. Because I mean, what do we like? We like contractual, repetitive returns. We don't see the glass is not half full, it's half empty.

So are these companies then that maybe they have high margins and they're just looking to get some leverage on their business versus people who are trying to fund some sort of big expansion with credit? There are many different reasons for putting a bond in this market.

Something that has become quite popular recently is sponsored companies bringing in new financing. And there you have to be a bit careful, of course. It doesn't always have to be bad, but you really need to be able to pick amongst all these issues. You cannot just buy all, which is

unfortunately quite common in this market. You really need to make sure that you look through all the numbers and don't get restarted on the adjusted EBITDA. It's crazy, but you can see out there. So you really need to be selective. And our approach to this is, I mean, my business partner and lead portfolio manager, Christopher Malmström, he comes more from a private debt world. So there they worked months before deciding on to

invest in something and they could really do deep deep analysis and you know get reports from McKinsey and Bain and whatever for us we have a few weeks to do the due diligence and

So we do spend as much time as we can and much more time than our peers. And I think that's one way of being ahead of competition and trying to really find an edge because that's what you need. Finding an edge. And if you do that, you iterate that all over again, every time. Then I think you have a good chance of being in the top, which is our goal in the end.

Well, I imagine as well dealing with a market like this, you're trading a lot over the phones, as Obi-Wan Kenobi said, a more civilized weapon from a more civilized age rather than this online trading. So how much of it is relationships, knowing where to go, who are good counterparties to deal with, who trust you and you trust them?

No, this is what I love about this market. I spoke to a Nordic legendary equity investor a few months ago and he told me, you know, Måns, this is like the equity market back in the 80s. You still do these OTC trades, you call the brokers, you do block trades. I mean, the price you see on a computer is not always the price in real life. We have 15 different counterparties or brokers.

And if you want to buy something, you really need to know who to call because you cannot call everyone. Because then people know your attention. Exactly. So you need to be a bit smart about this. But it's also a different skill, a different skill set. You have to be analytical, being able to do the analysis. And then when you're doing the trade, you really need to have that.

trade feeling or knowledge or experience. So this world is a bit different compared to the equities world. I mean, you really need to have knowledge, experience and network to be able to set up something that we think can be quite successful. There are no fax machines today, but almost.

That's funny. So what else is different than the equity world? Obviously, the way it trades is different. I imagine the investor base is different. What I think is very, very different is that Nordic Hylian's base is less crowded and less efficient. I mean, the equity market is more efficient. That's just how it is. And the market, as you pointed out before, is

It's extremely relationship driven and that's something you don't see in equity markets for today. And then last but not least, the infrastructure is also something out of this world. I mean, you cannot do trades in real time. It's Bloomberg chats. And as I pointed out earlier, you really need to be able to be analytical and to be a good trader to be successful.

What were you all doing before you decided to launch Ridge? And what about your backgrounds made you think that this would be, you know, a good next step for you?

Rich Capital was founded a few years ago in 2022 by my business partner, Kristoffer Malmström, who's also the lead portfolio manager, and myself. We have known each other since 20 years. We went to Stockholm School of Economics in Stockholm together. I am also portfolio manager, but also the CEO, so I have other responsibilities as well.

And my background is, I mean, when I was a kid, I dreamt about being a stockbroker in New York, whereas my friends, they wanted to be firefighters or astronauts or whatever it might be. And as I went to Stockholm School of Economics and

really found an interest in finance. So my first role was that I started out as a stockbroker at a Swedish boutique bank called HQ Bank prior to the financial crisis in 2007. So really good timing on that one. And I really saw, you know, the nature of finance and what that can do to people. So for me, you know, it was very interesting.

I thought that this is how finance is. It's total chaos all the time. So that's how I was raised, so to speak. And then back in 2020, my former bank got acquired by Carnegie Investment Bank. So I was there for five years. And then back in 2015, I was headhunted over to UBS, this big wealth and asset manager, as well as investment bank.

And I was leading our Swedish office, advisory office. And what we do was to help institutions and family offices as well as ultra high net worth individuals too.

find international solutions from the whole bank. It might be something on the M&A side, might be on the asset management side or wealth management side. So like 90% of my career I've been in wealth or asset management and then 10% of my career I've been in investment bank. But I'm more of a generalist. I haven't only worked in credit.

My business partner, Christopher Malmström, he has been in credit his whole life. I'm not sure that he dreamt about it when he was five years old, but who knows? So he started his career at UBS also, but in leverage finance in London.

And then he worked at Park Square Capital, which is quite big firm nowadays. They had different strategies, you know, private debt, opportunity strategies, distress strategies, etc. And then he moved back to Sweden and started to work for a boutique Nordic Hale managers company.

was it five, seven years ago and really started to work with what we work with today. So his last decade, he has always focused on high yield bonds and I'm more of a generalist.

I've been very fond of Nordic Agile since the financial crisis. And I think what I appreciate with Christopher, I mean, we really understand each other, but we also complement each other. And I think that's a key issue to build business with someone.

You have a lot of other duties. He's much more focused on the portfolio manager. Before this call, you said you're maybe 10, 20% of your day is looking at the portfolio where you've got all of these other things. I'm sure just hearing how you described the trading, there's a lot of reconciliation and accounting and making sure everything ends up where it is and is correctly marked with what was agreed to. Yeah.

But as well, the asset gathering side, I was amazed at not just the quick growth in assets. I mean, people reach this level sometimes before launch, but the steadiness of the growth. You didn't start out with a 200 million euro seed investment. You've built up to this very steadily over the last two

two years. And that's very uncommon. A lot of times it's a stair step function where you start with 25 and then you grow it to 35 or something like that. And then you're able to convince somebody to write you a big check and assets step up. I didn't really see that stair step function when looking at your AUM graph. So

you know, I'm sure that that's probably more your responsibility coming from that, you know, wealth management relationship background. What are you guys doing to gather assets so steadily? 2022, it was a quite volatile climate, investment climate. And I mean, in retrospect, it was a good timing to start a Nordic high yield fund in January 23. But back then,

It sounded a bit different, that's for sure. But we managed to gather 8 million euros from family and friends and our own money. And then we put everything into the fund. And now two years later, we have a bit more than 200. So it's been an incredible journey. Of course, humble of the timing. And also, as you point out, we had great performance. So that helps a bit.

But we always had a bit, compared to other companies that I have talked to, we have a bit of a different approach in capital raising. And I think we knew from the beginning that running this kind of company is like running a business. So you need a great product, the strategy we have, and then you need, of course, people that are interested in it and also subscribe to it.

But we also know that you need to find these kind of investors and you need to find them quite rapidly. So we were quite fortunate to have both, I would say, knowledge and experience, but also the network prior to setting up Rich Capital. So many of the investors we started to talk to, we have spoken to before.

And for us, our current investor base is mostly family offices and let's say tier three, four institutions and some ultra high net worth individuals, but always financial professionals. It might be other hedge fund managers, private equity partners. And then also we have some fund of funds, but those are a bit smaller. But single and multifamily offices, they really appreciated our work.

way of working and also our product and strategy. And I really think it's important that you know what kind of investors are attracted to what you have to offer. And then, of course, we only have a bit more than two years track record.

some of the fund selection guys at some of the banks that we, of course, have spoken to as well. They say, great product. We love you guys, but come back after three or five years when you have 500 million euros. And I tell those guys, I mean, then the fund is closed or the strategy is closed. We have reached maximum capacity. So understand the potential investor base. And yeah, that has been key to us.

Well, you mentioned financial professionals in particular. I have that as a refrain I've heard a few times. And usually it's because people are in a seat maybe that is a bit more mandate constrained and they look at your open mandate and say, you know, if I could, I would probably trade a bit more like you. I'm kind of restricted from doing it in my personal account, but I can allocate to other managers where I'm hands off. Do you find that that

sort of mandate constrained financial professional is it matches up with what you're talking about? Yeah, I've met many institutions where they have many boxes to tick. We tick most, but not all. And then it's much easier for them to choose someone else.

And that's why I think we've been quite successful when we can actually speak to professionals that handle their own money and really want to focus on performance instead of ticking all the boxes. And multi single family offices, they are a bit more flexible. They look for opportunity. They see something they like and they can act rather quickly.

So I think that's why we've been able to gather assets quite rapidly in a steady phase. We found these kind of investors and then I just continued on this journey since we started. Now, are they mostly in other Nordic countries, Swiss investors, people based in London? Are you looking at the US at all? What are the geographies? Exactly. No, we had...

we had a structure that was an international structure, we can say. So we knew from day one that we needed an infrastructure that could handle the international banks and all the brokers everywhere. But we also knew that we wanted the international structures because we had investors and we thought there would be investors outside of the Nordic region that would be interested in this as well. And we were correct. So, but today, yeah, we are in, I think,

More than 10 countries in Europe and UK. And of course, the holy grail for a European or someone in the Nordic hedge fund industry is US. But we're not there yet, but maybe in a year or two, Max.

Well, let's talk about a year or two now. As you said, you're quickly approaching your sort of unlevered cap of approximately 300 million euros. What are you going to do when you get there? Because usually, as you said, it's at that time that the big interest starts to come in. So as a business owner, what do you think about when you think about one to two years out when you might have those opportunities?

I made an early decision to prioritize performance before asset management because I think we could raise much more. But we needed this maximum capacity to be able to do the kind of trades that we would like to do. And if we are 300 mil in equity, then that means that we are less than 1% of the total market. And then we can still do great trades and hopefully be in the top.

with that said I mean this is not our end game we're still around 40

Sounds strange when I say that. I'm 39 actually. We're getting older, but we're not that old yet. So we still have some juice in us. And I always say that this is our last gig. So if this is our last gig, we have decades in front of us. Then you don't have to always focus short term. You can focus long term. And I mean, what is actually best to do long term? And I think

When you reach the maximum capacity, you should be honest to yourself and say, yeah, that's good. Then we find something else. So

Of course, you could look Europe, you could look at other sub-adjustment classes that are very close to what we do today. But I think as long as we see some challenges in that market or we think we can get an edge, which is extremely important to me, I always want to be the best. Otherwise, I'm not interested. So as long as we believe that we can

really be the best or gather a team to make sure that we are the best, then we will do that. But it's not yet decided. It would be a surprise.

And when you focus on performance, you build strong relationships with people. Oftentimes you can tap them for that next opportunity and you've built that trust to be able to say, "Hey, we see this opportunity in this other market. Things are still good over here in Nordic High Yield, but we see this over here." And they probably haven't given you their full stack of capital to work with.

When you think about building partners for the next thing, how do you make sure that people aren't just here for a quick trade on Nordic high yield? Long-term partners, that's the dream, right?

If you, for example, use, which I'm not saying that is wrong, but we haven't used any placement agents or third-party distributors. We have done everything on our own, which is a bit time-consuming, but I think it's worth it. And if you build a trusted investor base, and they're also our ambassadors. We call them friends of Ridge Capital. I mean, some of these guys are top investors.

industry experts in different countries and extremely knowledgeable. So we can actually talk to them if you want to have some kind of feedback regarding before a potential trade, for example. But to be able to build an investor base that they haven't put in 100% of the money into our strategy, but maybe a few percent, then I think that's a very good start. So I always think that we build for the future.

So even though it takes a bit more time and it's not a hockey stick, it's small but steady growth. I think that's the way to make sure that you build something for the long term. Because I've seen many, many, many companies that they have the hockey stick effect and then they have a bad year or something. And then as fast as the investors come in, they go out. And we really want to make sure that

We don't have that kind of risk because I see it as a risk. And I think the industry should. Okay. Let's say six months from now, 12 months from now, Harvard endowment comes knocking on the door and they say, we've got a half a billion dollars. I mean, it's everybody sitting in your seat says we're going to respect the hard. We're going to respect the cap, all of that. But then at the same time, gun to your head,

half a billion dollars comes knocking, what do you do? How do you manage that problem? The best problem to have. I haven't...

talk to Harvard, but if you know them, just direct them to me. But jokes aside, we have actually been approached twice now of a big investor coming in and wanting to grab the left of what's left of the capacity, and we turned them down. And I think the reason being that we felt that we could do this on our own, and given that we knew that there is a maximum capacity, we don't want to

give it away to someone. And then also, I mean, this is not a charity. I mean, everyone wants to make money, right? And if you only have this capacity left and you can give it to one partner that wants extremely low fees or you have several family offices that pay decent fee. I mean, I think that's probably the better way of doing it.

And also, I mean, now, Christoph and I, we are in control. We own this 50-50. That gives me a bit of comfort because I worked in finance and I've seen what happens when you get many people involved with different incentives. And for me and for us, it's extremely important to have the same alignments and same incentives. The full team is like a sports team. The full team should work in the same direction. And I'm not saying that

it's bad to have you know one big investor or another investor into the fund it might be positive but so far we haven't seen the need for it.

You bring up a great line of questioning on fees. What are fees like in the credit fund world? Is there a hurdle that you have to hit? And what are the, I don't want to say predatory, but what are those big guys who are coming in trying to

to get lower fees. What are the things that people are negotiating for that if you are going to take on a big investor like that, you should expect to have to give up to secure that type of capital? Yeah, I'm not sure how it is in the US, but in Europe, I mean, you have the management fee, you have the performance fee, and then you have a big prospectus, you know, 100 pages that you have to read through. Some of the bigger investors, if they have their own legal...

I mean, they can actually come up with ideas of improving the prospectus. But I think the management see what we have done. We have a

relatively low management fee. And that's, I think, quite common in the fixed income space. But in the credit hedge fund space, it's not very common. So we differ a bit there. But then instead, we have a performance fee that's classic, 15% to 20% above a certain hurdle with a collective high watch mark. And

I usually say that, you know, coming back to alignment, if our investors make money, we make money. And I have everything we own and Christopher as well into the fund as well. So everyone is happy if the fund performs. All right. Well, Mons, thank you so much for doing this. It's been an absolute pleasure. Best of luck to you and the rest of the team at Ridge. Thank you, Max. And everyone says hello to you. Thank you very much for having me.