New fund launches are often driven by a mix of market conditions and emerging opportunities, but for Norselab the introduction of its newest vehicle, Norselab Financial Hybrid, is above all a natural extension of expertise. The fund builds directly on the background of Ole Einar Stokstad, formerly Head of Credit Research at DNB Markets, who joined Norselab in 2022 to help establish the firm’s credit platform together with co-founder Tom Hestnes. After more than 15 years following banks, insurers, and regulatory capital structures, Stokstad’s experience has now shaped a dedicated hybrid capital strategy under the Norselab umbrella.
The launch of Norselab Financial Hybrid follows two earlier launches that have built strong momentum for Norselab’s credit franchise. The flagship Meaningful Impact High Yield, benchmark-agnostic and focused on the most attractive pockets of the B to BB+ credit spectrum, has delivered an annualized return of 13.8 percent since its inception in December of 2022. A year later, Norselab expanded its offering with a second high-yield fund focused on Nordic real estate, generating a strong annualized return of 20 percent over two years. The newly launched Financial Hybrid Fund is designed to complement the platform by offering a lower-risk, lower-volatility alternative that adds stability and diversification alongside the two higher-yielding strategies.
A Hybrid Capital Strategy Rooted in Expertise
Structured as an alternative investment fund, Norselab Financial Hybrid invests exclusively in regulatory hybrid and subordinated instruments, primarily Additional Tier 1 (AT1) securities issued by banks and Restricted Tier 1 (RT1) instruments issued by insurance companies, along with selective exposure to dated Tier 2 bonds. These instruments play a role in strengthening an institution’s balance sheet, but their structural complexity – stemming from perpetual maturities, optional coupons, and loss-absorption features – requires a high level of credit expertise. Stokstad’s research background forms the backbone of the selection process. “The launch of this third fund is a logical step because I had been working with banks and financial institutions for a long time,” he explains. “I spent years monitoring regulatory developments, capital structures, and pricing discussions internally.”
“The launch of this third fund is a logical step because I had been working with banks and financial institutions for a long time.”
Ole Einar Stokstad
The strategy maintains a clear Nordic focus, spanning the large universal banks, regional savings banks, and select niche lenders. At launch, the fund held about 10 percent in insurance instruments, no international exposure, and roughly 20 percent in niche Nordic banks. These smaller institutions provide what Stokstad calls “some spice” to the portfolio by offering higher yields than the region’s larger banks and insurers. However, concentration is tightly controlled: no more than three percent of assets may be allocated to any single niche bank, with total exposure capped at 20 percent. Limits are slightly higher for larger issuers, but the emphasis remains on broad diversification. “This fund has a conservative risk profile,” Stokstad notes. “The limits ensure diversification and prevent any single issuer from dominating the risk budget.”
Structural Strength and Return Profile
As with Norselab’s other credit vehicles, the Financial Hybrid Fund is structured as an AIF with monthly liquidity and redemption notice periods of at least three weeks. Stokstad views this structure as central to protecting long-term returns. “The advantage is that we are not forced to sell in times of stress,” he says. “We have a credit facility for margin calls, and with at least three weeks of notice for redemptions, we avoid having to liquidate positions at the wrong time.” The ability to sidestep forced selling, particularly during market dislocations, has been a recurring theme across Norselab’s credit platform.
“The funds complement each other perfectly. You get more stability and more diversification when including this one [Norselab Financial Hybrid].”
Ole Einar Stokstad
In terms of return expectations, the Financial Hybrid Fund targets a spread of roughly 300 basis points over the risk-free rate, translating into a yield of around 7-8 percent in the current environment. The goal is not to compete with the high-octane return profile of Norselab’s flagship high-yield fund but rather to provide a more stable complement. “The Financial Hybrid Fund will have a little lower yield, but it will in most cases be more stable,” says Stokstad, pointing out that defaults among regulated Nordic financial institutions are rare occurrences. He sees the strategy as fitting seamlessly within the broader platform. “The funds complement each other perfectly. You get more stability and more diversification when including this one.”
A Broader, More Balanced Credit Platform
Stokstad’s own allocation mirrors this philosophy. “For me, I have invested around 85 percent in the Meaningful Impact High Yield and Real Estate Credit Opportunities funds, and about 15 percent in the Financial Hybrid Fund,” he says. “The hybrid fund offers lower yield, but greater stability.”
“This fund brings additional stability to the platform while still offering attractive yield in a segment where we have strong expertise.”
Ole Einar Stokstad
With the high-yield strategy firmly established and the new financial hybrid fund now added, Norselab’s credit platform offers investors a broader spectrum of risk and return profiles built on the same disciplined approach to credit selection and structuring. “They’re going to live alongside each other,” Stokstad concludes. “This fund brings additional stability to the platform while still offering attractive yield in a segment where we have strong expertise.”
