Origin Energy splits fund managers over policy risk and Octopus upside

As Canberra's gas reservation policy and falling retail tariffs squeeze near-term earnings, some fund managers have walked away from Origin Energy in 2026 while others call the sell-off an attractive entry point into its Octopus Energy optionality.

31 May 2026 · 6 min read

Fund managers covering Origin Energy Ltd (ASX: ORG) spent May 2026 pulling in opposite directions. Quest Asset Partners switched its exposure out of Origin and into Santos, Antares Capital exited the stock entirely and reallocated to The Lottery Corporation and Worley, while Yarra Capital Management held its overweight position and called the weaker share price an attractive entry point. The split captures where the Origin Energy debate now sits: a business facing a thickening stack of policy headwinds, set against a retail and energy-markets franchise that several managers still regard as underappreciated.

Policy risk moves to the centre of the debate

The catalyst for the May exits was less about Origin's operating performance than about government policy working against it. Antares Capital said it exited "due to declining wholesale electricity prices, which are weighing on earnings from its generation business," adding that "government intervention in the gas export sector reduces the attractiveness of APLNG." Quest Asset Partners was similarly blunt, arguing that "Origin's decision to extend the life of the Eraring power station, together with two misguided Federal Government policies, and the delay in Kraken's IPO have capped the earnings potential of ORG for the short term."

Those policies have been building for months. Pendal Group flagged in May 2026 that the federal government's 20% gas reservation policy, due to begin on 1 July 2027, would weigh on domestic gas prices even though existing contracted volumes are grandfathered, and noted Origin is "among the most exposed companies." Earlier in the year, Pendal also tracked the state-based Victorian Default Market Offer and the draft Default Market Offer, both of which point to retail electricity tariffs falling in FY27, a headwind for retailer margins even as it helps the broader inflation picture.

Octopus Energy remains the biggest swing factor

The clearest test of the bull case has been Origin's 22.7% stake in UK-based Octopus Energy and its Kraken software platform. Cooper Investors laid out the thesis in September 2025 after a strong FY25 result, pointing to a $1.2 billion investment now valued at $3.1 billion, Octopus Retail's position as the largest UK energy retailer with 7.6 million customers, and Kraken Technologies' 74 million contracted customers across 17 countries against a global addressable market of 2.1 billion households.

We anticipate a potential IPO of Kraken to be the catalyst for unlocking the latent value embedded in this world-class technology business.

Cooper Investors, Quarterly Report, September 2025

That optimism has since been tested. Pendal Group reported in April 2026 that Origin downgraded Octopus Energy guidance from a range of $0 to $150 million EBITDA down to -$70 million to $30 million, noting the business "did appear to be tracking lower at the February result" and that "the stated financials are volatile and not terribly illustrative of the value of the business." Despite that reset, Yarra Capital Management has stuck with its overweight rating through the volatility, arguing the market is underappreciating all three of Origin's core assets.

We see positive catalysts and upside ahead for all three of ORG's major assets, Energy Markets, APLNG and Octopus Energy, and view the current share price as an attractive entry point.

Yarra Capital Management, Monthly Report, May 2026

Defensive appeal still has its backers

Not every manager is trading Origin on policy headlines. BKI Investment Company has kept its focus on the cash-generative core of the business, noting in March 2026 that Origin "continues to provide exposure to domestic energy security themes" and that its operations "continue to generate strong operating cash flows, providing both income and expansion optionality at a time when many growth-oriented sectors remain sensitive to higher funding costs." Oracle Advisory Group added Origin in December 2025 for a similar reason, describing it as a defensive holding that should benefit in a rising rate environment. Perennial Partners also topped up its position in April 2026, funding the addition by trimming an underweight in the major banks and taking profits in gold.

What managers are watching next

With Equity Trustees Asset Management having already exited on valuation grounds back in September 2025, even as it maintained Origin was "well positioned to benefit from the energy transition," the stock's near-term direction now hinges on a narrower set of questions: how the gas reservation policy is implemented from mid-2027, where the final Default Market Offer settings land, and whether Octopus Energy's trading stabilises enough to revive talk of a Kraken listing. Those catalysts, rather than the headline share price, are what is keeping fund managers split on Origin Energy heading into the second half of 2026.