While Nordic equities struggled to keep pace with global equity markets in 2025, Nordic small-cap-focused long/short equity fund Taiga Fund advanced 22.6 percent, marking its third-best year since launching in May 2008. In a year characterized by elevated volatility around “Liberation Day,” shifting tariff dynamics, and persistent geopolitical uncertainty, Taiga Fund stood out through its exposure to locally oriented Nordic companies with defensive characteristics.

“2025 turned out to be a good year for Taiga Fund, both in absolute and relative terms,” says Taiga’s investment team led by portfolio managers Ola Wessel-Aas and Andreas Petterøe. While European small caps delivered a solid return of 17.5 percent for the year, Nordic equities including small caps lagged most major markets, with the MSCI Nordic Small Cap Index returning just 9.8 percent. Against this backdrop, Taiga Fund’s 22.6 percent gain was a solid outperformance. While this marked its sixth year of returns above 20-percent over its nearly 18-year history, never being down more than 7 percent in any of its four down years is a more important contribution to its impressive long-term track record. The strong performance in 2025 has lifted the fund’s annualized return since inception to around 12.5 percent.

“2025 turned out to be a good year for Taiga Fund, both in absolute and relative terms.”

Uneven Recovery and Sector-Level Divergence

Reflecting on the year, the portfolio managers note that markets once again evolved in unexpected ways. “As always, the year did not play out entirely as expected,” they say. Despite household finances being in better shape, the anticipated consumer-led recovery proved uneven and delayed, likely weighed down by the uncertainty surrounding ‘Liberation Day,’ considers the portfolio manager. “While tariffs ultimately did not impact the broader economy and expose Nordic companies to the extent initially feared, a weaker U.S. dollar still weighed on earnings forecasts and will continue to do so into 2026,” the PMs add.

“While tariffs ultimately did not impact the broader economy and expose Nordic companies to the extent initially feared, a weaker U.S. dollar still weighed on earnings forecasts and will continue to do so into 2026.”

Taiga Fund’s emphasis on domestically focused companies with defensive characteristics across sectors such as education, healthcare, insurance, fitness, and leisure was a key driver of relative outperformance. In contrast, exposure to big-ticket consumer items and the housing sector detracted from returns. “Consumer sentiment seemed to gain traction again through the latter half of the year, and we believe that much of the recovery still lies ahead of us,” the PMs state. Even so, the team behind Taiga Fund maintains a preference for companies primarily exposed to the Nordic economies.

Bottom-Up Conviction and Measured Use of Shorts

Taiga Fund is run as a concentrated, value-oriented, long-biased equity strategy, with short positions used selectively and opportunistically. Rather than serving as portfolio hedges, these shorts are constructed as single-stock investments intended to generate positive alpha alongside the long book. The fund does not operate with predefined targets for gross or net exposure; instead, overall exposure evolves organically from the conviction level of individual investment ideas. In 2025, this resulted in a consistently high net exposure, which hovered around 80 percent for most of the year.

“The global economy initially weathered tariffs better than expected and rethinking our approach we did not increase short exposure through the fourth quarter as originally anticipated.”

While the team had entered the second half of the year expecting to deploy more capital on the short side, resilient economic data and stable markets led to a reassessment. “The global economy initially weathered tariffs better than expected and rethinking our approach we did not increase short exposure through the fourth quarter as originally anticipated,” the PMs explain. The limited short book generated positive alpha and detracted only around 15 basis points from performance in absolute terms, which the team considers acceptable in a broadly positive market environment.

Looking ahead, the PMs note that they see emerging pressures in certain parts of the market, including lower oil and gas prices, growing supply-demand imbalances in segments of the shipping industry, and businesses potentially vulnerable to AI-driven disruption. “With a solid track record of generating positive alpha on both the long and short sides, we have an ambition to deploy slightly more capital in both legs of the portfolio, allowing overall fund returns to benefit more from the long-short spread,” they conclude.