Stockholm (HedgeNordic) – DNB ECO Absolute Return, a market-neutral equity fund focused on the renewable energy and energy efficiency sectors, is in the process of closing down due to its small size and a sustained period of underperformance. The fund managed by Jon Sigurdsen (pictured) and Christian Rom is down 12.7 percent year-to-date through the end of March, after incurring a loss of 15 percent in 2019 and a decline of 14.4 percent in 2018.
“This is, of course, a shame for both the customers and us as a management team,” Sigurdsen tells Norwegian newspaper Dagens Næringsliv. “We thought we would be able to turn around the performance, but unfortunately we have not succeeded.” DNB ECO Absolute Return sought to benefit from the shift towards low-carbon economies and capitalize on short opportunities arising due to the hype and over-optimism around some companies in the renewable energy industry.
According to Sigurdsen, DBN ECO Absolute Return underperformed because the “shares that we found most interesting” did not perform as expected. The fund partially struggled due to its exposure to “more cyclical segments around energy efficiency, where we have been too optimistic.” The team’s stock selection on the short side compounded the problem. “Many stocks that were clearly overvalued in our models only became more and more expensive with falling interest rates,” Sigurdsen tells Dagens Næringsliv.
The main reason for the liquidation of DNB ECO Absolute Return is the small volume of assets under management, DNB Asset Management tells Dagens Næringsliv. The market-neutral equity fund oversees NOK 86 million (€7.3 million) in assets under management, down from NOK 134 million a year ago.