Now in its third year under the leadership of a former hedge-fund supremo, the management organisation behind Norway’s giant sovereign wealth fund has finally beaten the fund’s benchmark in a year of declining markets – with an intensified culture of contrarianism said to have driven that success.
Norges Bank Investment Management (NBIM) posted a set of dire annual investment results for the Government Pension Fund Global (GPFG) yesterday centred around a 14.1% loss on the index-tracker portfolio.
However, the central bank department running the now NOK13.4trn (€1.2trn) oil fund emphasised at its Oslo news conference that the loss was nevertheless 0.88 percentage points better than the return on the benchmark index – equating to an extra NOK118bn.
Nicolai Tangen, NBIM’s chief executive officer since September 2020, said in an interview with IPE: “It’s the biggest in money terms and it’s the first in a declining market.”
In percentage terms, though, the 2022 outperformance had only been NBIM’s sixth best, he said.
Even before Tangen’s appointment as CEO in 2020 – controversial at the time due to potential conflicts of interest given his investment links and personal invested fortune – observers speculated that he would champion increased active management of the GPFG.
Since then, he has indeed favoured active strategies and tactics to increase returns.
Contrarianism
In the new 2025 strategy plan published in December, NBIM states its intention to “strengthen our long-term mindset, be patient, and vary active risk as market conditions change”, as well as taking advantage of variations in asset pricing, and buying when others want to sell, and promoting psychological safety “so that our portfolio managers dare to be contrarian and avoid herd behaviour”.
IPE asked Tangen yesterday if his work to encourage contrarianism had been showing results, given comments from several top investment staff at the press conference about successful outcomes of positions taken for their asset class during and before 2022.
“I’m not going to take any credit for that,” he responded, adding: “But a big part of the excess return is due to more contrarian thinking and more collaboration.
“And the contrarian thinking was shorter duration, underweight equities, overweight energy, underweight IPOs,” Tangen said.
There had been more contrarian thinking in the organisation over the past year than there had been before, he agreed, but declined to link that to behaviour he personally had been encouraging.
“It’s a team effort and we are 600 people here,” he said.
But during the rebound the SWF experienced in January – a return over the month of more than 5% – betting against the market has receded.
“We have less contrarian positions now; we’re seeing less extreme situations,” he said.
An outgoing person, since becoming CEO of what may be the world’s largest sovereign wealth fund, Tangen has been vocal on career networking site LinkedIn, often making funny and self-deprecating comments and trying to connect with young people to encourage them to seek a career at NBIM.
“It should be the main employer in the country. We are moving in the right direction,” he said.
Asked if his communication approach, using his personal qualities, would make a big difference in that regard, he said: “I don’t know if it’s my personal qualities, but we are getting better and better applications. We are hiring people who we perhaps wouldn’t have hired in the past. We see it on the graduate applications, it’s very very popular,” Tangen said.
“There’s more transparency in the fund, there is more focus on the fund, the mission statement has been clearly articulated to the outside world and we’ve done a lot of work at universities and working with young people,” he said.
“You know, we’ve got tens of thousands of people following us on LinkedIn now and relative to the past, we have a new podcast series which is very popular with students, ‘In Good Company’, where we interview the leading CEOs of the world,” Tangen told IPE.
“We have people like Bill Gates coming here in February to record an episode. I think all this contributes,” he said.
NBIM is currently making changes at the organisation based on the new strategy plan, and Tangen cited several elements when asked which was the most significant change taking place right now.
“I think it’s to be more long term, more contrarian, more focused on operational robustness, developing the people and even more transparent communication,” he said.
Referring to the new multi-year strategy approved by the SWF manager’s board in December, and speaking at yesterday’s news conference, Ida Wolden Bache, NBIM’s chair who last year became the first female governor of the Norwegian central bank, summed up the rationale behind the measures in the Strategy 25 document: “To succeed in challenging and competitive markets, the executive board believes it is important that the fund’s investment strategies are tailored to the fund’s characteristics as a large fund with a long investment horizon and limited short-term liquidity needs.
“Moreover, in a changing world, preserving the values in the fund requires first financial resilience and operational robustness, and 2022 truly shows the importance of that,” she said.
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