Borea Utbytte, a banking sector-focused equity fund under Norwegian boutique Borea Asset Management, celebrated its five-year anniversary at the turn of September to October. The long-only equity fund, which sits in the equity long-only (ELO) index near the Nordic Hedge Index, has achieved an annualized return of 28.4 percent over the past five years. No other fund or hedge fund in our database of around 150 funds and none of the 697 funds listed on Nordnet has matched its returns.
“We are pleased with the results from the fund’s first five years,” says portfolio manager Magnus Vie Sundal. “We remain humble, acknowledging that some luck, a narrow mandate, and a favorable market have likely played their part.” Since its launch in October 2020, Borea Utbytte has delivered a cumulative return of 249 percent, corresponding to an annualized return of 28.4 percent.
“We are pleased with the results from the fund’s first five years. We remain humble, acknowledging that some luck, a narrow mandate, and a favorable market have likely played their part.”
Originally a fixed-income specialist, Borea Asset Management launched the equity-focused Borea Utbytte in response to a Covid-driven market dislocation, where the team saw a gap emerge between equity valuations and hybrid capital pricing at Norwegian banks. The fund may have been launched in response to an immediate market opportunity, but its core purpose from day one was to pursue long-term value in the Norwegian banking sector.
“Our investment idea has proven sound: to achieve solid returns by investing in good companies that earn good money, have strong local positions, and operate in a regulated industry — banks operating in a well-functioning society with a robust safety net,” Vie Sundal explains. “A safety net that doesn’t necessarily support the banks directly, but their customers. The dominoes simply don’t fall the same way here at home.”
“Our investment idea has proven sound: to achieve solid returns by investing in good companies that earn good money, have strong local positions, and operate in a regulated industry — banks operating in a well-functioning society with a robust safety net.”
On the Norwegian banking sector, Vie Sundal emphasizes a point often underappreciated: “Banking is fundamentally about macro risk. As long as businesses and individuals can service their debts, mortgages, and loans, the sector as a whole will perform well.” While Norway’s economy is somewhat concentrated in energy, according to Vie Sundal, the country’s sovereign wealth fund, the oil fund, provides a structural safety net that supports stability.
The Norwegian banking sector “may be conservative, but it is sustainable,” which aligns well with Borea Utbytte’s focus on quality and cash flow. Vie Sundal likens this approach to valuing the bird in hand over speculative opportunities, noting that potential gains elsewhere can vanish quickly. “The bird in hand is real; the ten on the roof can fly away faster than you can say ‘artificial intelligence,’” he jokes.
“Stock prices will, as always, fluctuate — but we continue to believe that banks will deliver solid returns in the years ahead.”
Investment decisions are influenced not only by business performance but also by valuation. Norwegian banks generate returns on equity comparable to the broader stock market, yet historically they have traded at a discount: savings banks at 1.1–1.2 times book value versus 1.6–1.8 times for the Oslo Stock Exchange overall. “Today, both are somewhat higher, but the discount remains,” concludes Vie Sundal. “Stock prices will, as always, fluctuate — but we continue to believe that banks will deliver solid returns in the years ahead.”
