For most things in life there is a manual, or at least a point of reference left by someone else who has been there and done it all before. But Slyngstad, who is responsible for the largest pot of liability-free assets on the planet, has had to create the current blueprint all by himself.
At the end of June, the Norway Pension Fund–Global had NOK3.5 trillion in assets. This amount is somewhere north of US$625 billion and, as noted, is larger than any other public fund ever reached without being earmarked for a specific purpose. The fund is required to give 4% of its assets to the national government each year, but its long-term liabilities remain expressly vague. Talking to aiCIO in 2010, Slyngstad said the usual queries and conundrums over managing these assets did not apply, such was the enormity of the project at hand. When asked for his views on the debate that was raging about how best to manage equities, he said: “We’re not for or against active or passive management for smaller firms or investors. What we are saying is that, for an investor of our size, we need to be a leader and take an active role. We don’t really think that there is an alternative to active management for our fund. In one sense, we are quite simply too large to contemplate indexing.”
The fund is the largest single holder of listed equities on earth. At last count, it held 8,200 companies, which made up 60% of the entire investment portfolio. If you think managing the volatility on a couple of billion dollars is tough, try it on a couple of hundred billion. Slyngstad found out exactly how this felt in his first three months on the job.
Having been in charge of just the equities portfolio since joining the fund two years after its inception in 1996, Slyngstad took over the top job at the start of 2008. By the end of March that year, the fund had experienced its worst-ever quarterly loss. By the end of the year, all the returns the fund had ever made had been wiped out—a 23.3% reduction in assets. However, it was not just the equities exposure that had hurt the fund: its fixed-income team admitted that they had also approached risk incorrectly.
A year later, the fund rebounded and Slyngstad told aiCIO that he was pleased with how the team had recouped all the losses it had made in 2008 - and the fund has been one of the strongest forces in ethical investment in recent years.
Slyngstad, with four post-graduate degrees—in law, business, politics, and economics—may not have anyone else’s map to follow, but given his most recent form, he may be amply qualified in drawing out his own. –EHP