After years of co-managing Alfred Berg’s high-performing high yield fund, Tom Hestnes has spent the past three years proving his strategy in an alternative fund structure under the Norselab Credit umbrella. With the flagship Norselab Meaningful Impact High Yield fund reaching its three-year anniversary this December, Norselab has evolved from a startup boutique into a proven player in the Nordic high-yield market.

“Time flies fast, we forgot to pinch ourselves,” says Hestnes, as Norselab Meaningful Impact High Yield marks its three-year anniversary. Reflecting on the boutique’s journey, he adds, “It’s been three and a half years since we started with just four laptops, and now we have three funds in three years, with a combined NOK 4.1 billion under management.” The flagship fund has delivered a cumulative 45 percent return since its launch, translating into an annualized return of around 14 percent. Beyond the three-year milestone itself, it is the fund’s consistent track record in the Nordic high-yield market that is likely to attract additional institutional capital.

“It’s been three and a half years since we started with just four laptops, and now we have three funds in three years, with a combined NOK 4.1 billion under management.”

“It was obviously tough for a startup to gain access to investors, but once we secured our initial NOK 500 million, assets under management have increased rapidly,” says Hestnes. “Hitting the three-year mark should lift us to the next level when it comes to wealth managers and long-lead clients like pension funds, and we’re already seeing that investor base picking up quite rapidly.” While Norselab Meaningful Impact High Yield secured capital from three wealth managers within just nine months of launch, “now that we surpass three years of track record, I do expect more institutional investors to come on board,” he adds.

The fund currently manages around NOK 2.4 billion, and while its three-year anniversary may attract new institutional investors, Hestnes stresses that “Norselab is and will always be a boutique manager.” He adds that the strategy will be soft-capped at NOK 5 billion to preserve its ability to deliver strong returns. “Significant AUM growth is your biggest enemy in Nordic high yield,” Hestnes warns. “To maintain a dedicated alpha-generating strategy, size does matter. We aim to stay lean and liquid, so we can fully harvest the risk premium that makes the Nordic high yield market so appealing.”

“To maintain a dedicated alpha-generating strategy, size does matter. We aim to stay lean and liquid, so we can fully harvest the risk premium that makes the Nordic high yield market so appealing.”

In a Nordic high-yield market largely dominated by generalist strategies, Norselab has chosen to differentiate itself with a niche, alpha-focused approach. “We’re an Article 9 fund, so our investable universe is smaller, but we are naturally shy of the most cyclical sectors,” says Hestnes. Together with co-portfolio manager Ole Einar Stokstad, Hestnes has managed Norselab Meaningful Impact High Yield within an alternative investment fund (AIF) structure since December 2022. This structure helps overcome structural limitations in the Nordic high-yield market, such as limited liquidity, by offering investors monthly rather than daily liquidity. It also allows for the use of leverage, with the fund benefiting from a 15 percent credit facility that acts as a liquidity buffer.

“I’m happy to see that the strategy remains intact and continues to deliver strong returns.”

“I’m happy to see that the strategy remains intact and continues to deliver strong returns,” concludes Hestnes. Norselab Meaningful Impact High Yield has returned 45 percent over its three-year track record. Its second, real estate-focused vehicle, launched a year later, has also performed strongly. “By coincidence, we launched the real estate fund a year later, and now, two years into operations, it’s also up 45 percent,” he adds. Building on this momentum, Norselab has launched a third fund targeting regulatory hybrid and subordinated instruments. Looking ahead, the boutique plans to continue expanding its product range while investing in additional resources and talent to support further growth.