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Friday, July 12, 2024

Oil fund boss fastens seatbelt

Yngve Slyngstad could report more billions of kroner in gains for the enormous sovereign wealth fund he oversees for Norway. He warned, though, that he expects turbulent markets to produce even more billions worth of swings during the year ahead, suggesting a bumpy ride ahead.

Yngve Slyngstad is a very important man in Norway. He's responsible for managing the country's huge sovereign wealth fund known as the "Oil Fund." PHOTO: Norges Bank
Yngve Slyngstad is a very important man in Norway, and around the world because of sheer investment clout. He’s responsible for managing the country’s huge sovereign wealth fund known as the “Oil Fund,” which ranks as the largest in the world. PHOTO: Norges Bank

Slyngstad and his boss, central bank chief Øystein Olsen, presented year-end results on Wednesday for the country’s proverbial piggy bank known as the Oil Fund. The numbers proved that Finance Minister Siv Jensen was right when she noted last year (after being accused of using too much money from the oil fund in the state budget) that the “piggy bank keeps gaining weight.”

It gained NOK 334 billion (USD 39 billion), or 2.7 percent, in 2015. That was much less than the average 4 percent viewed as the fund’s overall average rate of return, and the amount long-used as the guideline for how much oil money the state can use in its annual budgets. Olsen felt he nonetheless could declare at a press conference Wednesday morning that “once again,” the management of the fund had “yielded good results in a turbulent year.”

That was a tribute to the 53-year-old Slyngstad, who took over as head of Norges Bank Investment Management (NBIM) in 2008. He has an extensive education, ranging from law school and business school in Norway to masters degrees in economics and political science from the University of California and the University of Paris. He spent four years traveling in Latin America, Africa and Asia before launching a career in investments that now span the globe as well. He’s been dubbed by Forbes magazine as the world’s “most powerful global activist investor,” by virture of his job as chief executive of the world’s largest sovereign wealth fund.

Challenging job
Despite being aided by hundreds of oil fund staffers also now spread around the world to manage the money for Norwegians’ future pensions, the job was challenging indeed, according to Slyngstad himself. “2015 was a turbulent year with negative interest rates, volatile exchange rates, a falling oil price and weaker expectations for growth in developing markets,” Slyngstad said. He called the third-quarter of last year “terrible” because of problems in China, an oil price in free-fall and lower interest rates.

Still, things went quite well. Equity (stock) investments delivered a 3.8 percent return while fixed income holdings returned 0.3 percent and real estate produced gains of 10 percent. The results for equity and fixed-income investments were a half-percentage point higher than the benchmark indices the fund is measured against, NBIM stated in a press release.

Even though 2015 was a rough year, the fund’s market value amounted to a mind-boggling NOK 7,475 billion (roughly USD 879 billion) at the end of 2015, up from NOK 6,431 a year earlier. Most of the money is invested in stock markets around the world, with 61.2 percent of its assets in equities. Another 35.7 percent of the fund’s assets is in fixed-income investments and 3.1 percent in real estate, including many prime properties in cities like Paris, London and New York.

‘We expect swings’
Slyngstad said that the oil fund has no become so big “that we expect swings of as much as NOK 800 billion a year.” While the swings last year were upwards, they could also go downwards given economic uncertainty and volatile currencies, oil prices, interest rates and markets.

Both he and Olsen, though, were pleased if cautious. “This is a good result given the framework for the fund’s management,” Olsen said. “Now it’s important not to start thinking short-term. The main goal must be high, long-term returns at an acceptable risk.”

And that, Slyngstad noted, may result in losses along the way. “We must also be prepared for losses,” he warned, also on the order of the swings he predicted.

He said January of this year was also challenging, but that things otherwise aren’t so “terrible” as last year, so far. “Nevertheless, we must be prepared for turbulent times,” Slyngstad said. Berglund



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