The Norwegian sovereign wealth fund is the largest in the world, with $1.3 trillion in assets. Its managers have proven to be great strategists throughout its history, outperforming key indices and much of the actively managed mutual fund industry. However, now the managers of the Nordic fund acknowledge that the worst thing is that the refuge to protect itself is not clear. It seems evident that market conditions are going to be very difficult in the future, affected by geopolitical events and inflation,
“The geopolitical consequences of the war are difficult to predict, but we are probably facing the biggest changes in 30 years. There is little doubt that the increasing friction between the superpowers and warns Nicolai Tangen, executive director of the fund.
“The hard thing is not to make money when times are good. The hard thing is to make money when things get hard”
The job of the 528 experts who manage the Norwegian fund is to find sustainable assets that increase the fund’s profitability. This job is going to be very difficult this year. “The fund invests extensively in global markets… And it means that what happens around the world impacts the fund. There is nowhere to hide. In our world, risk is something we have to live with. Our job is to manage it. “Tangen maintains.
Today the market is a dangerous place. Stock prices are high in global terms, bonds also have very high valuations that are going to be hit by inflation and interest rate hikes. On the other hand, gold does not seem to take off either, although it has been a very profitable asset in times of inflation. Right now it seems that real estate is one of the few assets that seems to resist solidly to the turbulence.
Tangen acknowledges that “interest rates are still very low and share prices are high. All this together means we have a tough road ahead.” This expert believes that interest rate rises will cause a rebalancing in asset prices, which will have to find a new point consistent with a context of higher interest rates.
new normal
Tangen, resigned, asks himself that “what is the new normal for the fund? Is it more uncertainty and more risk than we have seen before? I think my answer has to be a ‘yes'”.
“We need to evolve and prepare for what’s coming. Two things are particularly important here: First, we need to have an organization with enough resources to manage risk and uncertainty, because a lot of money can be made there. The hard part is not making money when the “Times are good. The hard part is making money when things get tough,” says this expert.
“Secondly, we need to communicate well with our owners – the Norwegians. We totally depend on their trust in what we do. And there is a direct link between knowledge and trust. We are now being seen and heard more than in the past. For In order to generate the highest possible return for current and future generations, we must remain among the world’s elite of managers,” Tangen says.
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