The Most Ice-Cold Investor You Have Never Heard of

He is one of the most powerful investors in the world, at the head of the world’s largest pool of investment capital, and chances are you have never heard of him.

Most people know who Warren Buffett is.  If you are really into investments you have heard of some of the other influential players like George Soros, Carl Ichan, Steve Cohen, and Jim Chanos.  If you’re a closer student of the industry, and stretch your learning beyond just CNBC, you know David Swenson, Seth Klarman, and Howard Marks.  But, even many of the most well-read investment enthusiasts have not heard of the man who heads the largest sovereign wealth fund in the world.

His name is Yngve Slyngstad (not to be confused with Yngwie Malmsteen, who happens to be one of the best electric guitarists in history.  Check the link here for a wicked solo.)

Yngve Slyngstad is President and CEO of Norges Bank Investment Management, the company responsible for the management of Norway’s $870 Billion Government Pension Fund Global (GPFG), the largest pool of active investment capital in the world.  To put that in perspective, the largest endowment in the world is run by Harvard University and has assets of about $33 billion.  Meanwhile, the aforementioned David Swenson, head of Yale’s endowment (famous for the “Yale Model” of endowment investment) manages $24 billion.  Currently, the largest private foundation is the Bill and Melinda Gates Foundation which has $42.3 billion.  Even the California Public Employee Retirement Fund (CalPERS) comes in at around $312 billion.

The sheer weight of capital that this man commands is staggering.  At $870 billion, the Norges Bank is currently invested in about 1% of the entire global stock market.  That is some amazing influence to yield and Yngve has not been shy about using that influence when it suits the fund.  Even before he took over as CEO in 2008 he was working to change the entire strategy.  Up until that point the returns had been lack-luster and Yngve (who holds 4 master’s degrees) was determined to change that.  His approach was three-fold.

More Active – take an active approach in the management of the funds.

More Risk – Increase the share of equities in the fund.

More Transparency – Everything needs to be monitored and reported to the public.

And while his investment approach has certainly drawn its critics, Yngve discusses it with the ice-cold matter-of-factness.  In a recent clip (found here) he talks about a recent decision to divest from companies where coal drives over 30% of their business.  He says that the fund is supposed to last generations, and that coal is not a business that will help the global economy in generations to come.

The fund has also divested from companies that produce weapons, (Lockheed Martin and Boeing), Tobacco (Altria, British American Tobacco), or have been determined to undermine human rights (Walmart).  And a divestment of NBIM money is a big deal.  Wal-Mart’s market cap is $213 billion, meaning an average investment from the fund of 1% amounts to the loss of a potential $2 billion investor!

The fund’s active management have not always been of the altruistic kind.  One investment which landed NBIM some bad press was the bet against bonds from Icelandic banks.  It, in essence, shorted Iceland’s financial system! The fund maintained that it was strictly for investment reasons and had no ulterior or political motives – it simply saw Icelandic banks as being bad investments.  Iceland, however, was furious because its larger neighbor’s sovereign wealth fund put on a bet that would pay off if Iceland’s economy deteriorated.  It would be like buying life insurance on your neighbor.  You could tell him, “Listen Frank, you just aren’t very healthy, that’s all.  I’m not going to do anything, but I just think the odds are good that you aren’t going to last very long.”  Despite you telling him you have no ill intentions, I still don’t think Frank would be very happy with you.

When Institutional Investor asked Yngve about the matter for an exposé they did in 2008, he “had no comment”.  (For the record, the investment almost certainly was a big gainer for the fund, even if they withdrew early in the spirit of playing nice with their neighbors)

He is not shy, however, about making comments to companies that his fund invests in.  For instance, in 2016, Yngve spoke to a German newspaper about Volkswagen.  Specifically, he was critical of the Porsche and Piech families that own the majority stake in the company.  As a large minority shareholder, he has lobbied for greater rights for the minority shareholders (like the NBIM beneficiaries) for the past few years.  Yngve told the newspaper “This cannot be a role model for Germany.”

When you have the head of the largest active pool of capital in the world, who is also a 1.6% owner of the company, you would think that the board would at least talk to him.  However, he also said to the paper “We as co-owners don’t get the impression that the family wants to listen to us.”  Even if the board is not listening, I guarantee they are at least talking about the ramifications of alienating, and angering, one of their larger shareholders.

But despite some occasional controversy and disagreements, observers have generally lauded the funds efforts.  It’s focus on responsible investing and complete transparency have given rise to the phrase “the Norway Model”.  From the Journal of Portfolio Management in 2012: “In a short period, this fast-growing fund has become an exemplar for investors around the world.  The Norway model has become a coherent and compelling alternative to the Yale model for endowment investment.”

In fact, check out the website for Norges Bank, you can see all of the fund’s holdings including how the position has changed over the years.  Mr. Slyngstad even releases his personal investment records, which is a level of transparency that is completely unheard for most institutional investors.

Yngve does not look like someone you would want across the table from you at a poker game – and his ice-veined demeanor can be backed up by unquestionable knowledge, intelligence, and a comfort level with blazing his own path.  Not only does he have 4 master’s degrees (earned from the University of Oslo, Norwegian School of Economics, University of California, and University of Paris) but he put those degrees to work by back-packing for the next 3 years across Europe, Asia, and Latin America by himself.  This included a 6-month stint in the north of Norway, living alone in an isolated fisherman’s cabin with no electricity.

His latest strategic shift in the fund has been to build an allocation of 5% in direct real-estate holdings.  It should be reminded that 5% of $870 billion, or $43.5 billion, can buy an awful lot of property.  So, while the CEO may have been comfortable living in a remote fishing cabin, the fund has begun purchasing marquis property in some of the biggest markets in the world.  Just don’t go assuming these shiny office buildings are for show.  As Slyngstad commented to Investments & Pensions Europe –

“We have no interest in trophy assets, and I don’t know whether you’d call what we have been buying trophy assets. It’s not part of the strategy.  But it’s right that we have a strategy to invest in core real estate, some of the better office buildings in some of the larger cities of the world.”

While far too few investment professionals have even heard the name of Yngve Slyngstad, his model for investing in companies that have responsible goals, being active in corporate governance, and offering complete transparency on the process, is beginning to gain recognition.  So at your next foundation meeting, when someone brings up the Norway Model as a best practice for fiduciaries, you can say you read about its creator here first.

Until next time….

“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.” – Yngve Slyngstad