The world’s biggest sovereign wealth fund is looking to more than double the number of industry specialists in its equities team as the $840bn Norwegian oil fund steps up efforts to outperform global stock markets

February 23, 2014 9:31 pm

Norway’s oil fund to double specialists

By Richard Milne in Oslo

The world’s biggest sovereign wealth fund is looking to more than double the number of industry specialists in its equities team as the $840bn Norwegian oil fund steps up efforts to outperform global stock markets.

Norway’s oil fund is one of the world’s biggest equity investors, owning on average 1.25 per cent of every listed company globally.

Giving a rare insight into the inner workings of the oil fund, Petter Johnsen, its chief investment officer for equities, told the Financial Times he was looking to bulk up the number of portfolio managers that follow specific sectors such as US banks or European insurers.

“It needs to be double the size and larger, so we are recruiting actively,” Mr Johnsen said.

The oil fund splits the 85-90 people in its equity unit into four groups. Three are focused on investment: one with sector specialists; another that deals with special situations or projects, such as companies seeking to list; and a third that invests more broadly in global equities. The final group is dedicated to training.

Mr Johnsen said the fund currently had about 20 sector specialists who each invested in about 10-15 companies with “fairly significant positions” in each.

“It’s not a trading strategy as such. It’s taking a view on the longer-term fundamentals of the business,” he added.

The oil fund, which holds about $540bn in equities, has faced a sharp debate in Norway in the past year about its size. Its assets have increased fivefold over the past decade as it has become the world’s largest sovereign wealth fund.

But some politicians in Norway’s new centre-right government have floated the idea that the fund should be split up.

Mr Johnsen, who said such the debate about the fund’s size was a “political question”, nonetheless said the fund has shown it was “fully capable of managing a large fund”.

One of the fund’s own answers to questions about its size has been to emphasise how it can use its characteristics – described by Mr Johnsen as “long-term, large, global, low-cost” – to increase returns by taking a more active approach to investing.

Increasing the number of sector specialists was important for this end, said Mr Johnsen.

“This group will expand quite a lot going forward. We’re still in a build-up phase,” he said. “In terms of how we’ve picked [which sectors to focus on] it’s based on who we recruited, but it’s also based on where we think we can utilise the fund’s characteristics to the best extent possible and maybe also where we actually have had success.”

He said that meant the fund had spent more time and enjoyed more success in European industries.

Eight of the fund’s 10 biggest equity holdings at the end of September were in Europe led by Nestlé, Royal Dutch Shell, Novartis and HSBC.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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