Nordic high-yield-focused fund Ridge Capital Northern Yield has emerged as one of the standout newcomers on the Nordic fund scene. Since launching in January 2023, the strategy has delivered two exceptional first years, demonstrating that even in high yield, annual returns approaching 25 percent are possible under the right conditions. The strategy has now delivered an annualized return of 14 percent since inception.
Navigating a Tighter Market
After two particularly strong years, 2025 proved to be more challenging. Lead portfolio manager Christoffer Malmström describes the year as the fund’s weakest so far, though performance remained broadly in line with the broader market. “2025 was our weakest year, especially given that we set the bar quite high for ourselves,” he says. After the opportunities that emerged in the wake of the interest rate shock of 2022, spreads gradually compressed, reducing the margin for excess returns. At the same time, the market saw several idiosyncratic credit events. “The challenge stems from a couple of areas, starting with an environment of tighter and tighter spreads,” Malmström explains. “Then there were a few default situations in the market, driven more by company-specific issues rather than any broader systemic problems.”
“2025 was our weakest year, especially given that we set the bar quite high for ourselves.”
Lead portfolio manager Christoffer Malmström
During the year, Ridge Capital faced a few credit events in the portfolio but avoided permanent losses by actively engaging in the restructuring processes. The team took a leading role in negotiations, seeking to maximize. “We believe we can extract significant value out of those situations,” he says. “Either we recover closer to par or, in some cases, potentially even above par because we have gained additional upside through equity participation.”
Experience in Distressed Situations
Handling difficult situations is an area where Malmström’s previous experience at private credit manager Park Square Capital has proven valuable. According to him, many investors react too quickly when bonds start trading lower. “Sometimes managers become sellers at the first sign of trouble, either because they panic, or because they have automatic stop-losses that kick in, which pushes prices down to levels that are simply not rational,” he says.
“Sometimes managers become sellers at the first sign of trouble, either because they panic, or because they have automatic stop-losses that kick in, which pushes prices down to levels that are simply not rational.”
Lead portfolio manager Christoffer Malmström
Successfully navigating these situations requires both experience and the willingness to engage deeply with documentation, negotiations, and restructuring processes. “You need to understand how to negotiate, what levers you have, and how the documentation works,” he explains. “And of course we work with very strong legal advisors who guide us through these processes.” For Malmström, being comfortable with such situations is a prerequisite for investing in higher-yielding credit markets. “If you are too afraid of defaults, you limit how much risk you can take, and that also limits your return potential, we believe in controlled risk taking.’’
The Structural Appeal of Nordic High Yield
Despite the tighter spread environment, Malmström continues to see structural attractiveness in the Nordic high-yield market compared with other regions. Nordic spreads remain significantly wider than those in European high yield. “You can still see spreads around 500 basis points in the Nordics compared with roughly half of that in the European market,” he notes. Viewed in terms of all-in yield, spreads of around five percent combined with cash rates near two percent translate into a total yield of roughly seven percent. “That is quite attractive for a credit instrument, especially considering that it’s not that far from the long-term performance of equities.”
“You can still see spreads around 500 basis points in the Nordics compared with roughly half of that in the European market. That is quite attractive for a credit instrument, especially considering that it’s not that far from the long-term performance of equities.”
Lead portfolio manager Christoffer Malmström
Part of the explanation for this yield premium lies in the structure of the Nordic market. The issuer base consists largely of smaller companies compared with the mid- and large-cap issuers that dominate the European high-yield market. “Many investors perceive larger companies as lower risk,” Malmström notes. Another distinctive feature is that a large portion of Nordic bonds are not formally rated. This limits participation from global investors who rely strictly on ratings-based mandates. “The global high-yield universe is very rating-focused,” he explains. “Many investors only invest in rated bonds, which means they simply don’t participate in our market. That naturally dampens demand.”
Liquidity, Volatility, and Opportunity
The Nordic market has long been associated with lower liquidity, particularly during periods of market stress. Malmström believes this perception is increasingly outdated. While investors still benefit from an illiquidity premium, the market has evolved significantly in recent years. The average bond size has increased materially, often exceeding €100 million and sometimes reaching €150 million, compared with €50 to €75 million earlier in the decade. “That naturally improves liquidity,” he says. The investor base has also broadened, with participants from the United States, the United Kingdom, and other regions becoming more active in Nordic credit.
The growing presence of international investors, however, may not necessarily stabilize the market during risk-off periods. In fact, Malmström believes it could introduce additional volatility. Historically, the Nordic high-yield market was dominated by long-term institutional investors and long-only funds that typically bought bonds at issuance and held them until maturity. Some newer participants behave differently. “If they see a quarterly report that doesn’t meet expectations, they are willing to sell quickly and take a loss,” he observes. “That sentiment was much less common a few years ago.”
“When certain investors move in and out quickly, it creates price volatility that is sometimes not justified. If you like something at 100, you might like it more at 95, and you could love it at 70. Being contrarian is very much part of our DNA.”
Lead portfolio manager Christoffer Malmström
For Ridge Capital, such behavior can create opportunities. The fund’s structure allows the team to take advantage of market dislocations. With monthly liquidity, the ability to use leverage, and a more concentrated portfolio than traditional long-only funds, Ridge Capital is positioned to act when prices become disconnected from fundamentals. “When certain investors move in and out quickly, it creates price volatility that is sometimes not justified,” Malmström explains. “If you like something at 100, you might like it more at 95, and you could love it at 70,” he says. “Being contrarian is very much part of our DNA.”
Carry, Catalysts, and Capacity
Looking at the broader market environment, Malmström still sees conditions characterized primarily by company-specific opportunities rather than broad macro-driven dislocations. Despite recent volatility linked to geopolitical developments in the Middle East, the market remains relatively stable. “It is still very much idiosyncratic,” he says. While some outflows have been observed in daily-traded credit funds, those vehicles tend to maintain large cash buffers, which has limited forced selling in the market.
In this environment, Ridge Capital does not expect spread compression to be a significant driver of returns. Instead, the strategy relies primarily on structural carry. “You can buy assets generating high single-digit returns, and with leverage that becomes low double-digit returns,” Malmström explains. On top of that, the team looks for event-driven opportunities where bonds trade at discounts and catalysts could drive price appreciation over the following months. “If those catalysts materialize, they can add a couple of extra percentage points to performance,” he notes. Recoveries from the distressed situations encountered in 2025 may also contribute to returns over the coming years.
“We want to ensure that we can continue delivering the returns we set out to achieve. Performance comes first.”
Lead portfolio manager Christoffer Malmström
As the fund entered 2026 with a three-year track record and steady growth in assets under management, Ridge Capital is also carefully managing capacity. The strategy currently manages slightly above €200 million and plans to soft-close at €300 million to preserve flexibility and the ability to generate attractive returns. “We want to ensure that we can continue delivering the returns we set out to achieve,” Malmström says. “Performance comes first,” he concludes, noting that maintaining the ability to execute the strategy effectively will take precedence as assets approach the planned capacity.
