Stockholm (HedgeNordic) – For Danish fund boutique Othania, 2024 was already shaping up to be a great year in terms of performance. November, however, elevated 2024 from “great” to “fantastic” as all five Othania funds recorded their best monthly performance of the year.

“We have had a really good year both in terms of absolute and relative performance so far – so I’m very pleased with that,” says chief investment officer Vincent Dilling-Larsen. Othania, founded by Dilling-Larsen and his younger brother Christian Mørup-Larsen, is known for its systematic risk assessment model known as TIGER. This model evaluates the level of risk in equity markets for the month ahead, utilizing leading indicators on economic activity, interest rates, and stock market trends.

“We have had a really good year both in terms of absolute and relative performance so far – so I’m very pleased with that.”

The three funds utilizing the TIGER model, which posted gains ranging from 6.2 percent to 7.2 percent in November, maintained long positions in global equities going into November and the U.S. elections. Othania Allokering Verden and the flagship Othania Invest employ the model to allocate capital either into equity or bond exchange-traded funds (ETFs) based on the anticipated level of risk in equity markets for the month ahead. Meanwhile, Othania Globale Aktier operates as a pure equity fund that dynamically shifts exposure between “offensive” and “defensive” equity exchange-traded funds (ETFs) depending on market conditions. “The TIGER model kept full risk-on throughout November, and since global equities did really well – so did we,” explains Dilling-Larsen.

For Othania Balanceret Makro, an all-in-one fund blending stocks, bonds, and alternatives, November’s strong performance was driven by a combination of strong global equity returns, a maximum overweight position in equities through the TIGER model and solid returns from the fund’s liquid alternatives portfolio, particularly commodities and FX, according to the Othania CIO. The fifth fund, Othania Stabil Investering, maintains an equally weighted portfolio across five asset classes, including equities, global investment grade bonds, precious metals, CTA strategies, and long volatility strategies. Its performance in November was primarily fueled by strong global equity returns, decent gains from the bond portfolio amid falling rates, and notable contributions from the liquid alternatives portfolio. 

Navigating and Adapting to Challenges

“In general, the TIGER model helped us to cut through all the noise and perceived risks surrounding the U.S. Presidential election, enabling us to keep our risk budget at maximum utilization,” explains Vincent Dilling-Larsen. All Othania funds have delivered a strong performance in 2024, with returns ranging from 14.9 percent for Othania Stabil Investering to 29.9 percent for Othania Globale Aktier. “I think the past one and a half years have been really good,” says Dilling-Larsen, noting that this success comes after navigating the challenges of 2022 and 2023.

“In general, the TIGER model helped us to cut through all the noise and perceived risks surrounding the U.S. Presidential election, enabling us to keep our risk budget at maximum utilization.”

“We did a lot of “soul-searching” after 2022 and the first half of 2023,” reflects the founder of Othania. “We thought we were well-prepared for rising inflation and rising interest rates.  Even though the TIGER model predicted the high-risk periods really well, the moves from the FED were too big to cope with – even though we were positioned in short-duration bonds,” he explains. The unprecedented pace of the rate-hike cycle “posed challenges for anyone with any kind of bond duration.”

“We did a lot of “soul-searching” after 2022 and the first half of 2023.”

The team at Othania introduced minor adjustments to the TIGER model during the summer of 2023, refining both its signals and implementation processes. “The adjustments have improved performance since then and especially in 2024,” notes Dilling-Larsen. “The changes don’t fundamentally change the model but ensure we are better prepared should a second round of inflation come.” 

The Othania funds have maintained a long and overweight position in equities throughout the year – a decision that, in hindsight, proved to be the right one. Despite the ongoing geopolitical risks and the continuation of war in 2024, “our data-driven approach has enabled us to cut through the noise and act on data,” concludes Dilling-Larsen. “Our implementation decisions, particularly the focus on overweighting Momentum and Quality stocks, have also significantly contributed to our strong performance.”