Norges Bank Investment Management NBIM

Yesterday we listened to Mr. Yngve Slyngstad who is the CEO of Norges Bank Investment Management, the wheicle that is managing the Norwegian USD 420 billion petroleum fund.
Mr. Slyngstad has a unique task managing this amount of money.
Mr. Slyngstad spoke in Norwegian at the Stockman prize symposium held by the Norwegian NFF organization.

The Stockman prize was instituted by our predecessor Farmand magazine in 1988.

There are groups of people in Oslo working towards making Oslo a regional capital management hub. This kind of quality symposiums are good steps in this direction. Here at Farmann we support the ambition of making Oslo a finance hub.

Takeaway quote from Slyngstad:
“The financial markets are extremely good at transferring wealth from pensioners into the pockets of people working in the financial industry.”

These are our personal notes from the lecture by Mr. Slyngstad, we give them to you bullet form in the raw transalted to English. Please forward the link to this article to anyone following the Norwegian Bank funds as they might find some of this interesting:

- 3 government customers
- 200 employees, additional 400 working for us full time
- 400 000 transactions per year
- 90% of all trading is automated trades not using brokers
- Claims to be extremely cost effective
- Holds 1.1% of all European equities
- Holds 0.55% of world equities.
- Fund will be some USD 520 billion in 2009
- Gets “7 times more shares per barrel of oil now than when we started”
- Buying shares heavily
- We are a “Beta machine” that is, going with the flow of the entire market
- 50 internal mandates, or pools of money under management
- 100 external mandates, or pools of money under management
- Extreme delegation
- Extreme diversification
- Shanghai office 8 people
- Beta returns managed from Norway
- Alfa (above market returns) returns managed outside Norway
- “Some of our people might even be a bit to much into finance theory.”
- Mai 2006 and Aug 2007 saw major changes
- Have created an internally used term called “Risk appetite Beta”
- There is currently no way to measure liquidity risk. The risk of securities stopping trading.
- We constantly review how we look at our portfolios.
“We look at them differently, then differently, then differently again.”
- Use 21 different factors to measure our portfolios
- What we have seen recently is a correlations collapse. A fall down to 0.15-0.20.
Correlations then revert again to 0.60.
- The quantitiative is important, but the qualititive should not be forgotten.
- New mandate is 60/40 shares/bonds
- Have lost some money during the turmoil, not much, and way within their risk mandate.
- “During our first 10 years we have only used up 20% of our riskadjusted framework.”
- Liquididty have been underpriced during the last boom.
Liquidity will be priced again. This is good for investors with liquidity.
- Correlations collapses is something we have to learn to live with.

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