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Top Nordic Fund Asks What If Negative Rates Are Permanent

  • Delphi Nordic fund's top stock holding is Novo Nordisk
  • Fund recently made a small `low risk bet' on Statoil

The top performing Nordic stock fund is concerned there may soon be no way out.

After returning 46 percent last year, Oeyvind Fjell, who manages the 5 billion-krone ($600 million) Storebrand ASA Delphi Nordic fund, is becoming increasingly concerned that investors will lose faith in the central banks.

QuickTake Negative Interest Rates

“What happens the day when you have negative rates and growth still doesn’t pick up?” he said in an interview in Oslo Monday. “What happens when the market says that the central banks are worthless? They have done everything but it doesn’t work. I’m a bit afraid that negative rates become the new normal.”

With global stock markets last week entering a bear market for the first time in five years, Fjell is clearly not the only one asking these fundamental questions. Central banks across the world are going all out to revive growth and inflation, with policy makers from Tokyo to Frankfurt cutting rates below zero.

Fjell, who uses trend and fundamental analysis to pick 30 to 40 stocks, prefers stable companies that will not disappoint on earnings or those that have their own unique products. That means investing in companies such as Novo Nordisk A/S, biotech company Genmab A/S, Vestas Wind Systems A/S and jewelry maker Pandora A/S.

Pandora can drive its top line growth without help from the economic cycle, Fjell said. The shares rose 1.1 percent in Copenhagen and traded at 848.5 kroner as of 5 p.m.

“It’s like H&M long ago,” he said. “They grow in existing stores while they roll out in new areas all the time and get high growth. They still look good.”

The Delphi Nordic is the best performing Nordic fund over the past five years, according to Morningstar Inc. The fund had an average annual return of 18 percent compared to 12 percent for its reference index.

While Sweden has the “best fundamentals,” the outlook is worse for Norway where the fund has reduced its exposure, according to Fjell.

“The oil price is of course a problem for Norway,” he said. “Norway is on its way down. The risk for the consumer here is on the downside.”

Still, the manager in January bought a little bit in Statoil, the country’s biggest oil producer. The stock gained 0.8 percent in Oslo to 121.4 kroner.

“The oil price can bottom around here and find a bottom rather soon,” he said. Then Statoil is a pretty good bet. You don’t go broke if you’re wrong but if the oil price move up to $40 Statoil will rise. It’s a low risk bet.”

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