The Golden Age of Fundamental Commodities Trading with Tor Svelland of Svelland Capital (18.5% Annualized Since Inception)

Episode Summary

Executive Summary: Tor Svelin explains how his commodities hedge fund was built on deep physical shipping experience, a long-term thesis of structural underinvestment in energy, metals and shipping, and a flexible trading approach that chooses the best instrument—futures or equities—at each moment. He argues ESG and tariff shocks matter less than supply-demand realities, and says CTAs now materially shape commodity pricing.

Main Topics: Tor Svelin’s background in physical commodities and shipping (Priority: 5/5): Svelin traces his career from Norwegian shipping and commodity work in 1989 through Athens, Klaveness, Carnegie, Goldman Sachs, and Trafigura, emphasizing hands-on physical market knowledge and international exposure. Why Svelin Capital was launched and how it was funded (Priority: 5/5): He says the firm was started after years of preparation, funded initially with his own capital, with the goal of building gradually and retaining ownership/control rather than taking early outside capital. Structural underinvestment in commodities and shipping (Priority: 5/5): A central thesis is that oil, metals, and shipping remain underinvested, making these markets fragile on the supply side and supportive of long opportunities. ESG, renewables, and the end of the hype cycle (Priority: 4/5): Svelin criticizes ESG scoring as inconsistent and argues the market is now better distinguishing real, productive energy businesses from slogan-driven narratives. Futures vs equities: choosing the cleanest expression of a view (Priority: 5/5): He prefers the instrument that best isolates the thesis, often futures when supply-demand is the core idea, but equities when a company-specific or longer-duration trade is better. Market structure, CTAs, and new participants (Priority: 4/5): Svelin says commodity markets now include far more CTAs, macro funds, and retail access than in 2017, increasing volatility and creating opportunities for fundamentally oriented managers. Fund growth, capacity, and hiring philosophy (Priority: 4/5): The firm targets growth only so long as returns remain high, with a soft close around 1.2bn in the core strategy and a preference for experienced traders with passion and global curiosity.

Key Arguments: Physical operating experience in ships, ports, and cargo flows gives a trading edge because commodities are real-world, globally connected markets. Commodity markets are dominated by chronic underinvestment in rigs, mines, and vessels, so long-term supply fragility supports bullish opportunities. ESG was often applied inconsistently and obscured the reality that energy and industrial production are still necessary. Tariffs and reshoring are manageable in commodities because traders can calculate freight/economic impacts and reroute flows quickly. Futures are often the cleanest way to express a macro supply-demand view, while equities can add unwanted company-specific risk. CTAs have become powerful price setters; their trend-following can push markets beyond levels that fundamental human traders would typically accept. The firm’s edge comes from knowing which market instrument to use and staying within a focused commodity universe rather than chasing unrelated opportunities.

Data Points: Net compounded return since inception: over 18% net of fees - Svelin Capital performance since launch in 2017 Firm inception: 2017 - Year Svelin Capital was founded Track record length: 8 years - How long the fund has been operating Current investor count: 250 investors - Size of the investor base today Core strategy AUM: over $900 million - Assets mentioned near the end of the interview Core strategy capacity: about $1.0 billion to $1.2 billion - Estimated capacity range before a soft close Target minimum return: 15% - Return threshold Svelin says he wants to preserve as the firm grows Future plus strategy starting size: $100 million - New futures-only strategy size at launch Past leverage range: 0 to 1.5x - Leverage used in the strategy Oil price proxy example: $1.5 million - Illustrative port-of-call cost used to explain tariff impact on US Gulf crude Shipping age comment: 1 day older every day - Illustrating the aging of the global fleet Container/gas market share figures: 34% and 44% - He cites North Sea/Russia-related gas exposure into Europe and the UK in discussing LNG/TTF risk LPG freight move: $50,000/day down to $10,000/day and back up - Example of unusually strong supply-demand dynamics after a selloff Oil equities example year: 2022 - Year he says the fund traded oil well and made strong returns Oil trading return example: up 47% - Fund performance in oil during 2022

Pivotal Quotes: "The easiest way to make P&L and good money in the commodity space is normally when you have an oversupply market with weak demand." — Tor Svelin: Explaining why today’s fragile supply side makes the current setup different and often more bullish "If we can do a good renewable company, you're producing electricity, whether it comes from onshore wind, solar or hydropower, it doesn't really matter. You produce electricity and we all need whatever electricity you can get your hands on." — Tor Svelin: His view that energy realism matters more than ESG labels "We are not under pressure to be invested at any given time in older markets." — Tor Svelin: Describing the fund’s flexibility to stay in cash or wait for the best setup "The CTAs are definitely contributing in a good manner. We love them." — Max: Closing remark highlighting the role of systematic traders in commodity markets

Implications: Commodity investors should focus on physical supply-demand, not narratives. Underinvestment, aging assets, and CTA-driven volatility may keep opportunities rich, especially for specialists who can choose the right instrument and remain disciplined on capacity.