Stockholm (HedgeNordic) – Harald James Otterhaug has decided to close down the energy-focused long/short equity fund he has managed for nearly two decades. Despite generating almost 30 percent per year over the past five years, OAM Absolute Return Fund struggled to attract new investor inflows after a significant drawdown in 2018-2019, caused by market inefficiencies persisting longer than expected.
“It’s sad to close the fund because it’s been such a big part of my life for 19 years,” Otterhaug tells HedgeNordic. “But it’s also exciting because the closure opens new doors and opportunities.” Over its almost 19-year history, OAM Absolute Return Fund, which was named the best Nordic hedge fund of 2023 at the Nordic Hedge Award, achieved an annualized return of 12.6 percent since launching in late 2005.
“It’s sad to close the fund because it’s been such a big part of my life for 19 years. But it’s also exciting because the closure opens new doors and opportunities.”
Otterhaug and his team at Oslo Asset Management employed a bottom-up approach and in-depth fundamental research to identify and capitalize on relative-value inefficiencies in the energy industry. However, inefficiencies that the team aimed to exploit occasionally remained inefficient for too long, leading to a substantial drawdown and significant investor outflows in 2019. By early 2020, rumors were circulating in Oslo that the fund was likely to close, with assets having dropped from about $476 million to below $50 million in just nine months.
Nevertheless, 2020 marked a reversal for OAM Absolute Return Fund, which delivered a 51 percent return that year, gradually recovering from its 50 percent drawdown. The fund continued to perform strongly, gaining 45 percent in 2021, 27.5 percent in the challenging markets of 2022, 22.8 percent in 2023, and an additional five percent so far in 2024. Over the past five years, the fund has delivered an annualized return of 29.9 percent, all while maintaining a net negative exposure.
Assets under management have recovered from under $50 million in 2020 to over $170 million this year, driven purely by performance gains. “Despite the strong performance, it has been difficult to rebuild assets to previous levels,” Otterhaug admits. The fund’s assets under management hovered above $400 million throughout the first half of 2019 and reached a end-of-month peak of almost $670 million in late 2012. “We have met with over 400 individual investors in recent years, so it’s not for lack of trying,” he notes. “While investors are intrigued by the strategy, the 2019 drawdown seems to have kept many on the sidelines.”
“Both Lars and Ole-Jacob have been integral to this journey and have contributed significantly to the strategy. It’s a venture I support 100 percent.”
As Otterhaug steps away to explore new opportunities after the completion of the fund closure, his co-portfolio managers, Lars Tjeldflaat and Ole-Jacob Storvik, plan to continue running the strategy on their own. “Both Lars and Ole-Jacob have been integral to this journey and have contributed significantly to the strategy. It’s a venture I support 100 percent,” Otterhaug concludes. Although OAM Absolute Return Fund is closing at a peak, much like a celebrated athlete retiring at the top of their game, the strategy may continue to thrive under Tjeldflaat and Storvik, and Otterhaug’s future endeavors are eagerly anticipated.
