Jarle Sjo leaves, Odin warns of new tax regime
Odin, the Norwegian asset manager owned by Sparebank 1 Gruppen AS, has announced that one of its best known portfolio managers Jarle Sjo is leaving by the end of the year, while Norwegian investors generally face a new tax regime that could hit returns.
Sjo, the manager of the Norge, Norden and Aksje funds, became investment director in December 2011. He is particularly well known in the Norwegian and wider Nordic region for his insight into the shipping and offshore sectors – shipping and offshore services collectively form a significant part of the Oslo stock market because of the link to the country’s offshore oil and gas industry.
In a statement, Odin said that the departure was down to a “different view of the company’s further development”, and so he had decided to depart at the end of the year. Rune Selmar, CIO, will run the Odin Norge fund until a new manager is appointed.
Odin has included a warning in its Christmas message to clients about the effects of new tax law in Norway on investment funds.
The new law takes effect on 1 January, which is expected to lead to lower levels of tax on interest income, but higher taxes on gains from equities. The changes stem from the Norwegian government’s policy of seeking to lower taxes more generally on earnings, both for individuals and companies. However, this is not the case for gains earned from equity holdings, Odin suggests.
The tax changes will also hit balanced funds in another way. That part of the total return that comes from equity exposure will be considered earnings from equity holdings and be taxed at a rate of 28.75%, but returns from the interest element will be treated as interest based earnings, and be taxed at a rate of 25%.
The equity portion of the balanced portfolio will be treated with an effective flat tax rate, which will be reset each year on 1 January, and therefore will not take into account adjustments to the equity portion during the year.
“This means that the equity and fixed income parts are not necessarily in accordance with the fund’s real share of equity and fixed income returns. Over time the setting of the [flat tax] will lead to part of the fund’s equity returns being taxed as returns from interest at the customer level. For retail clients his will be beneficial, but detrimental to business clients,” Odin said.
As a result of these changes, Odin has urged investors in its balanced funds to consider switching to either pure equity or pure fixed income funds – in its case possibly to the underlying funds used by its balanced portfolio Kombinasjonsfond.
It is also urging investors who are uncertain of the impact on their tax position to consider taking advice from tax advisers.