Norwegian equity investment giant announces shift to active management

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The world’s largest sovereign wealth fund is considering a more active approach to investing, according to the updated strategy it unveiled on Wednesday.

Norges Bank Investment Management, the branch of the Norwegian central bank that manages the NKr 11,162 billion, equivalent to $ 1.3 trillion fund, revised its strategy several months after chief executive Nicolai Tangen took office. Mr. Tangen joined us in September after previously managing a $ 21 billion London-based hedge fund.

“What we want to do is make sure that we are using risk in a slightly more productive way,” Tangen said in an interview on Wednesday.

As the world’s largest single shareholder, the fund owns an average of 1.4% of listed companies worldwide, making it a significant investor in companies like Apple Inc. and Alibaba Group Holding Ltd. The fund returned 10.9% last year.

As part of the updated strategy, the fund’s portfolio managers will focus less on the macroeconomic environment or factors such as growth, and more on the valuation of individual companies. Mr. Tangen pointed out such measures in a December interview with the Wall Street Journal. The fund has been involved for years in an active versus passive fight over how best to invest, with everyone from outside fund managers, former Norges Bank Investment Management executives and academics weighing in.

Created in the 1990s to invest income from oil discoveries in the North Sea, the Oil Fund, as it is called, preserves wealth for the future. It adheres to a mandate given by the Ministry of Finance to manage its holdings in more than 9,100 companies. Most are index driven and the fund cannot invest in most private companies.

In the future, the oil fund will make more use of forensic accountants to stamp out fraud, Tangen said. The fund was able to minimize its losses at German payment company Wirecard AG in 2019 after uncovering irregularities and reading early media coverage. Mr. Tangen said he hopes to do more.

The fund, which previously presented plans to invest in wind and solar power, said on Wednesday it had made its first investment in an unlisted renewable energy project. He signed an agreement to buy half of a Dutch offshore wind farm for 1.375 billion euros, the equivalent of 1.63 billion dollars. Such investments should always represent a small percentage of the overall portfolio, which is around 70% dedicated to equities.

The fund’s plan to increase active management also includes the use of environmental, social and governance criteria to exclude companies from investing, the use of more external fund managers and the addition of additional portfolio managers. in Oslo, where the fund’s headquarters are located.

Mr Tangen said he and his team were monitoring the effects of inflation on all asset classes, but had not changed the portfolio to benefit from a so-called “stimulus trade”.

Write to Julie Steinberg at [email protected]

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Appeared in the print edition of April 8, 2021 under the title “Norway Fund Shifts to Active Management”.


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