Stockholm (HedgeNordic) – Danish boutique asset manager Othania continues to expand its fund offering with the launch of a pure equity fund – Othania Globale Aktier – relying on its proprietary “Tiger” investment model that evaluates equity market risk on a monthly basis. The model will switch the soon-to-be-launched fund’s exposure from “offensive” equity exchange-traded funds (ETFs) to more “defensive” equity ETFs during periods of higher equity market risk.
“The investment strategy is based on our award-winning TIGER model that estimates the risk in the stock market one month ahead, a model we have been using successfully for more than six years in our other funds,” explains Vincent Dilling-Larsen, the CIO who co-founded Othania with his younger brother Christian Mørup-Larsen in early 2016. Designed by Vincent Dilling-Larsen, Othania’s proprietary “Tiger” investment model estimates whether risk levels in the stock market are rising or not for the coming month using leading indicators on economic activity, interest rates, and stock market movements.
“The investment strategy is based on our award-winning TIGER model that estimates the risk in the stock market one month ahead, a model we have been using successfully for more than six years in our other funds.”
“When the TIGER model is positive on equities, Othania Globale Aktier will invest 100 percent in a portfolio of global equity ETFs tilted towards several risk-on factors such as momentum, quality, sustainability, value, etc.,” explains Dilling-Larsen. “When the TIGER model is negative on equities – when the fluctuations in the stock market typically increase by 70 percent – then we invest 100 percent in a multi-factor global ETF equity portfolio consisting of factors such as low volatility, minimum volatility, long volatility and other defensive sectors.” Othania Globale Aktier is expected to launch in mid-June.
“When the TIGER model is negative on equities, then we invest 100 percent in a multi-factor global ETF equity portfolio consisting of factors such as low volatility, minimum volatility, long volatility and other defensive sectors.”
“2022 has been a challenging year for most equity investors and global stock returns have been challenged,” Dilling-Larsen reflects on the performance of broader equity markets so far in 2022. “If you dive into the data, the remarkable thing is not the fall in global equities,” continues the Othania founder. “It is the difference between the stock returns on defensive and offensive stock sectors.” The Euro-denominated MSCI World Minimum Volatility Index, for instance, edged down 0.8 percent in the first four months of 2022, whereas the more offensive Euro-denominated MSCI World SRI Index was down 9.5 percent and the U.S.-denominated MSCI World Momentum Index was down 16.3 percent.
“The challenge for equity investors is the difficulty to find the sectors or factors that will be the next winners. But, at Othania, we are now launching a completely innovative equity fund, to solve just that problem!”
“In recent years, equity investors should have been invested in either technology stocks or sustainable stocks to get an additional return to the one offered by the general stock market,” says Dilling-Larsen. “2022 has been the exact opposite – now you suddenly have to allocate to equity sectors that have previously not been attractive, namely defensive and stable stocks with low fluctuations,” he continues. “The challenge for equity investors is the difficulty to find the sectors or factors that will be the next winners – and it is even harder to switch to the sectors or factors that haven’t been popular for the past several years. But, at Othania, we are now launching a completely innovative equity fund, to solve just that problem!”
