Norway Set To Pick New Chief Of $1.2-Trillion Sovereign Wealth Fund

Norway is seeking to fill a position that some have described as the country’s “most important job.”

Norges Bank Investment Management, or NBIM, a subsidiary of Norway’s central bank, Norges Bank, manages the Norwegian Government Pension Fund Global, better known as the Norwegian oil fund – the world’s largest sovereign wealth fund. The fund is looking for a new boss as Yngve Slyngstad, who led the fund for 12 years, announced his resignation last October.

The wealth fund now has a global portfolio with $1.2 trillion in assets, having quadrupled in size in only a decade. It is designed to fund pensions for future generations of Norwegians.

The fund holds interests in more than 9,000 companies and owns 1.4% of all listed stocks around the world.

“The fund has become so big, and so important for Norway, this appointment is not just about finding the right person but a chance for the whole system to think what it wants the fund to be, how it wants it to work,” said one candidate for the job.

The vacancy comes at a turbulent time for Norway’s oil industry – not only are environmentalists calling for oil companies to cease drilling activities, the Oslo government has a new finance minister Jan Tore Sanner (who wants to break up the oil fund). The central bank is also seeking a new deputy governor – the man or woman who directly oversees the fund.

The fund – which is now three times the size of Norway’s economy – is immensely important to the country. Without contributions made by the vast fund, Norway’s budget deficit would amount to 8%.

“There is a lot to decide. Who is in charge, should the fund be taken out of Norges Bank, how should it invest?,” said Hilde Bjornland, a professor of economics at BI Norwegian Business School in Oslo.

Under Slyngstad, the relationship between the fund and the Ministry of Finance reportedly became tense. The ministry and the parliament together set the policy and asset allocation for the fund, but often clashed with Slyngstad over investment decisions.

“The person who is appointed [the next] CEO must be able to reset the relationship and rebuild trust with the Ministry of Finance. During the past few years, the relationship has soured and trust has eroded,” said Espen Henriksen, an associate professor at BI Norwegian Business School.

Bjornland is concerned the fund and its policies have come under too much control of politicians and their agendas.

“To make the fund into a political tool is dangerous. One thing is to take ethical considerations, as the fund does today,” she said. “But some politicians suggest that the oil fund should invest to make the world greener. I think that is not the right way and could put us in difficult situations.”

Oystein Olsen, the governor of Norway’s central bank, warned Oslo lawmakers not to politicize the fund and focus solely on choosing assets that will maximize returns with an acceptable amount of risk.

“There has been broad political agreement that the fund should not be used to promote other objectives,” he said in a speech.

Later he added: “If the goals of the fund management should include some other dimensions, that makes the management role more difficult.”

Olsen made his comments after Jonas Gahr Store, head of the opposition center-left Labour party who might become the country’s next prime minister, said Norway should indeed use the fund as a political vehicle.

In recent years, as an overture to environmentalists, the fund has refrained from investing in coal and oil and gas exploration companies. In the past it banned investments in tobacco firms and nuclear weapons parts makers.

“We’ll have to adapt to the climate risk and take that into consideration regarding the fund’s investments,” Olsen said. “But using the fund actively as a means of doing something about global [climate] challenges is something else. The fund is not a suitable means for doing that.”

In 2017, the fund raised its equity allocation to 70%, making it highly vulnerable to a stock market correction.

“I am worried that the politicians don’t fully understand what a 30% fall in the fund would mean for them and the state budget, and in turn what that would mean for their trust -- and that of the public’s -- in the fund,” said one potential CEO candidate.

Some potential candidates for the top job include Martin Skancke, a former finance ministry official; Jon Gunnar Pedersen, an investment banker; Rune Bjerke, the former CEO of Norway’s largest bank, DNB Group; and Trond Grande, the current deputy chief executive of NBIM.

Other candidates include Petter Johnsen, NBIM’s chief investment officer for equities; Jens Petter Olsen, a former Danske Bank executive; Lars Aagaard, a Barclays banker in Asia; and Ole Christian Bech-Moen, head of allocation strategies for NBIM.