LONDON: Norway’s US$1.8 trillion sovereign wealth fund benefits from a rare consensus among its political masters, according to chief executive officer Nicolai Tangen, unlike other countries which are exploring such an option.
“We have a very constant investment philosophy and I think that’s really one of the success factors behind the fund,” Tangen said, speaking in a Bloomberg TV interview. “It means that when we have a change of government our investment philosophy does not change.”
During a fraught US election season, aides to both President Joe Biden and President-elect Donald Trump crafted proposals for setting up a sovereign wealth fund.
The United States isn’t alone. Delegations from countries ranging from Ireland to Argentina have visited the Norwegian capital of Oslo to discuss strategies with the Nordic nation’s government officials.
“Norway is the poster child of sovereign wealth funds,” Northeastern University professor in global business Ruth Aguilera told Bloomberg TV. “Mostly because it’s super transparent in their goals.”
Norges Bank Investment Management (NBIM) – the official manager of the fund – is the world’s biggest single owner of public equities, with shares in almost 9,000 companies globally.
It was established in the 1990s to invest Norway’s oil riches and is largely an index-tracker, working according to a strict mandate from the country’s Finance Ministry.
It has achieved an annual return of about 6% over the quarter of a century during which it’s existed.
“We try to have a longer-term time horizon in what we do, so typically we measure results over a rolling three-year period,” Tangen said. “That’s important in this market, to be increasingly long-term in your thinking.”
A former hedge fund chief executive, Tangen joined NBIM in September 2020 from AKA Capital, which he founded in 2005.
During his tenure, the executive has encouraged traders to take more contrarian views and warned that inflation is likely to continue to weigh on returns in the coming years.
He said earlier last week that he plans to seek a second term in the job when his current five-year stint expires next September.
With Tangen at the helm, NBIM has taken a stronger stance on environmental, social and governance issues and on corporate governance.
That includes disclosing voting intentions for annual general meetings ahead of time, taking the co-lead on a class-action lawsuit against Silicon Valley Bank and sitting on advisory boards for international standard setting bodies.
The fund has also ramped up holdings in unlisted renewable infrastructure.
“Climate risk is a financial risk,” the executive said.
“A deteriorating climate is causing worse harvests and driving up prices. We see it now in coffee, olive oil, orange juice and so on. So it’s basically a financial risk, and it hasn’t been the case before. But it’s increasingly the case.”
Tangen has sought to boost the profile of the fund, placing a particular emphasis on transparency as stakeholders and observers become more vocal.
“You have a lot of stakeholders, people who want to have a say in pretty much everything, so you have to navigate this,” Tangen said. “That’s a very, very interesting exercise.” — Bloomberg
