The Norwegian Equity Market

We believe the Norwegian equity market is a great place to invest. Listed Norwegian companies are profitable and internationally competitive with strong historical returns and a robust market structure that contribute to a favorable outlook. In fact, over the last 20 years the Norwegian stock market has been one of the world’s best-performing.

The companies on the Oslo Stock Exchange have the majority of their sales abroad. They are thus exposed to global market conditions and international growth. Examples include oil major Equinor, global telco Telenor, integrated aluminum company Norsk Hydro, and fertilizer producer Yara. Companies which are more exposed to the domestic economy include consumer stocks like Orkla, and financial institutions like DNB. Compared with other equity markets, the Oslo Stock Exchange has a relatively large energy sector. It also has a rather unique salmon farming sector, which makes up about 15 per cent of the Oslo Benchmark Index.

Norway is a small and open economy with 5.3 million inhabitants. GDP per capita is among the world’s highest, in part thanks to a well-educated population and the country’s large petroleum reserves. Norway is a relatively equal and non-hieratical society with a strong social safety net, and ranks as number 1 on the UN Human Development Index. The country’s sovereign credit rating is AAA+ with a stable outlook, and its banks are among the world’s best capitalized. Norway has a sovereign wealth fund of 1 trillion dollars, where excess income from the petroleum industry has been set aside for future generations.

In our view, Norwegian companies practice strong corporate governance, driven by guidelines systemized from the Norwegian Corporate Governance Board (NCGB/NUES). Companies should have an independent board of directors, and companies are by law required to separate their CEO from the Chairman of the board. Different share classes are very uncommon on the Oslo Stock Exchange, and companies should ensure the equal treatment of shareholders. We believe company communication is in general honest and equitable, and our access to senior management is strong. The principles for good corporate governance are given on a “comply or explain” basis, asserting that companies should explain in reporting when and why they may differ from them.

OSEFX  weighting , 1-oct-2018. (Source: Oslo Børs, Bloomberg)

Arctic Norwegian Value Creation is research driven and truly index-independent UCITS fund. The investment process focus on identifying companies which are considered to be value-creating over time at a reasonable price. The portfolio is constructed by bottom up stock picking. There are no constraints regarding sectors and the goal is to achieve the best possible long-term risk-adjusted return. The funds benchmark is Oslo Stock Exchange Mutual Fund Index (OSEFX).

Past performance in the fund is no guarantee for future returns. Future returns depend on the market, fund manager skill, fund risk level, costs, among others. Performance in the fund may at times be negative and may vary within periods.