Deep Thoughts by Yngve Slyngstad

Ashby Monk

Yngve Slyngstad is CEO and CIO for Allocation at Norges Bank Investment Management (NBIM). And, in case you missed it, the Monitor Group thinks NBIM is the biggest sovereign wealth fund in the world — even bigger than ADIA. So, I think it’s fair to say that Yngve Slyngstad is kind of a big deal in our little SWF community. When he talks, I listen. And, lucky for us, he has been talking to the Financial Times recently. So without further ado, here are some ‘deep thoughts by Yngve Slyngstad’:

On Europe: “…we do believe that the changes going on in Europe at the moment may actually be positive for the private sector. You do get some rethought, restructuring, maybe some narrowing of the scope of the public sector. For the private sector, that may well be positive and also for the companies. So, in fact, we’re quite positive on European equities going forward.”

That’s probably true; the EU governments won’t have the capacity to do much in the way of “crowding out” in the coming years, which means the private sector could potentially see some new opportunities (if it isn’t taxed into oblivion).

On Risk v. Volatility: “From our point of view, volatility is not identical to risk. There is an underlying risk in the system which is more or less constant, whereas volatility flares up once in a while and certainly it has over the past few years in quite dramatic instances. As a fund, we see that sort of volatility as an opportunity and as a possibility for us and not necessarily as a negative.”

He’s right; volatility is often used to measure risk, but they really are different. It’s only in our ridiculously short-term oriented marketplace that the two concepts start to feel like they are identical. So I’m really pleased to see Slyngstad talking like this. I agree with him that keeping this differentiation in mind can generate opportunities for truly long-term investors.

On The Crisis: “We were down 23 per cent in 2008, we were up 26 per cent the year after and 10 per cent last year so we recovered from that crisis. If it has reinforced something for us it is two things: the value a very long term outlook and the ability of using the crisis as a buying opportunity. During the financial crisis, or from the start in August 2007, to May 2009, we bought equities for a total of $175bn. Now, we will see in 10 years or 20 or 30 years whether or not that was a good decision but two out of three of our equity holdings were actually bought during the past three years.”

Yeah, this is where an intergenerational investor really adds value. Very nice.

On Infrastructure: “The challenges operationally and with regards to political risk in infrastructure investment is a particular challenge for this fund and also because of our size it is difficult to get a significant allocation but it is something that will be considered over time but there are no immediate plans.”

Size of allocation and operational complexity I get. Not allocating to infrastructure because of politics? Big frustrated sigh.

On the “Norwegian Model”: “We’re not really comfortable being portrayed as a model for anyone else. Any country and any fund has to make its own decision on how they want to invest their own resource wealth.”

Amen! As I said before, I think the Norwegians can offer considerable insight on how to set up SWFs. However, not every fund in the world has to be based on Norway’s model. It seems to me that countries cite the Norwegian fund when they want to assuage the West about their intentions, noting (correctly) that many Westerners don’t seem to be concerned about the behavior of the NBIM. But the secret ingredient for why nobody thinks of the Norwegian fund as being a threat…lean in close so you can hear me…is because it’s Norwegian. And, unfortunately, it can be quite hard for other countries to incorporate “being Norwegian” into their own SWFs. (Though, interestingly, it’s not impossible; see here and here).

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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