Norway’s sovereign wealth fund is a fairytale of global finance. In less than 25 years investing the energy riches of the North Sea, it has grown into a $1.2tn giant; it owns 1.5 per cent of the world’s publicly traded companies. Who more stimulating for me to have my first formal lunch with in six months, I think, than the man who for more than a decade presided over this behemoth — and used its heft to hold company boards to account for their environmental and social impact?
Yngve Slyngstad, who stepped down this summer, has proposed we meet at FishWorks in Marylebone, central London. From the outside, FishWorks looks like a small unadorned fishmonger. He leads me past crates of fresh fish into the restaurant area in the back. He likes it, he says, because it is “one of the few places where you know they actually receive their own catch”.
He also chose it, he says, for the cryptic reason that “we could in theory call the fund the ‘fish fund’”. What he means, it turns out, is that the “oil” fund — which regularly covers a sixth of public expenditure — is unrelated to oil per se. What Norway has done is save its export surplus, which might as well have come from the country’s other bountiful North Sea resource. Most of the fund’s value comes from accumulated gains on bonds, shares and property. As he observes wryly: “We haven’t even started spending any of the oil money.”
I am meeting my compatriot before London descends into the second lockdown. For a split second I regret venturing out, for while the fish looks impeccably fresh, the place is not ideal for social distancing. The waiters all wear face coverings, but even so, it’s an eerie feeling to be indoors at what will turn out to be a very busy lunchtime, with tables less than a metre across.
Slyngstad notes with approval that FishWorks offers whole grilled fish to share. I suggest the Cornish monkfish. Slyngstad walks back to the front of the restaurant to inspect the fish himself and has already put in the order when he returns to the table.
I mention that fish names are the hardest to learn across languages — he has to remind me that monkfish is breiflabb in Norwegian. In addition to English, the 58-year-old knows French and some Japanese, having studied in both countries as well as the US, and German from studying existentialist philosophy.
For four years, he took advantage of lectures being non-compulsory to travel the world with his books — “I had the idea that philosophy is not something you learn at the school desk.” His odyssey ended with six months reading Heidegger in the splendid isolation of a cabin in northern Norway.
Our waiter has come to ask if we want starters. Slyngstad chooses scallops, I plump for the fish soup.
Are we going to have wine? “For me it’s straightforward”, says Slyngstad; as a government employee he may not drink during working hours. “But you absolutely should have some.” I agree but decide to wait until the main course.
I tease Slyngstad that he has nearly always had a spartan style. In a rare scandal, it was revealed this spring that he had flown back from a US conference on a charter flight paid for by Nicolai Tangen, a billionaire hedge fund manager who in March was announced as Slyngstad’s successor. That mis-step — the central bank, which houses the fund, quickly repaid the costs of the trip — was overshadowed by much greater turmoil around Tangen’s terms of appointment, which initially allowed him to retain ownership in his own hedge fund. But it was a scratch in Slyngstad’s otherwise polished record.
He doesn’t take the bait, just points to his published correspondence with Tangen, which shows they have had no untoward contact. Then he shifts the subject to the meaning of the fund itself, which he sees as an expression of egalitarianism.
89 Marylebone High St, Marylebone, London W1U 4QW
Fish soup £7
Scallops starter £13
Monkfish whole £65.28
New potatoes £4
Tenderstem broccoli £5
Espresso panna cotta £6.50
Apple raspberry crumble £6.75
Sparkling water x2 £7.50
Glass Pouilly-Fuissé £12.50
Fresh mint tea £3.50
Total (inc eat-out promotion and service) £130.78
“I think it relates to allemannsretten,” he says, referring to Norwegians’ legal right to roam. “We never questioned whether we owned the oil together,” Slyngstad points out. This egalitarian premise means the savings policy “has to be frugal”, and because the fund is “democratically anchored it has been important for me to take a cautious line”.
Can that line be maintained, I ask? He hesitates — my impression is that he is pondering how much he should weigh in on a job that is no longer his — before answering: “Yes, it has to. It has to.
“Your first task when you lead the fund is to ensure the model is accepted.”
This must constrain what the fund can do, I say. Every investment is listed on its website, every result potential fodder for political bickering. “Yes, but not necessarily in a bad way . . . We meet the democracy-capitalism nexus all the time — that has been one of the most fascinating things [about the job].”
It is not obvious how a young hermit reader of Heidegger ended up running one of the world’s biggest investment funds. Slyngstad credits his interest in finance with how it is “where everything comes together . . . like a gravitational field”, and how financial markets are “by definition forward-looking”. He adds that “the last generation working in finance has had a privileged role [and] a central role in society’s development.”
None more privileged than him, one might say. He has followed the oil fund’s meteoric trajectory almost from the start. His tenure as chief executive is bookended by the global financial crisis and the pandemic.
Our starters arrive. Slyngstad’s three scallops are beautifully arranged on their shells, and he asks for an extra plate to give me one. I apologise that I can’t reciprocate; the scallop is in any case far more satisfying than the soup, which is adequate but as unmemorable as it is unshareable.
I ask Slyngstad what the job of running the fund actually entails, given that it is bound by a tight investment mandate, aiming for “index-like” investing “with low costs and without big mistakes leading to debate”, as Slyngstad puts it. “Ninety-nine per cent of the risk” comes from the specification of asset classes, geographic shares and permitted deviations from a reference index. That limits the scope for stockpicking.
Through the fund’s advisory role, however, Slyngstad and his colleagues have argued for and largely been permitted to shift into riskier assets. From first only investing in the safest sovereign bonds, opening up to equities was “without comparison the most important decision” in the fund’s history, says Slyngstad, who built up the equity team when he first joined. Increasing the equity share from 40 to 60 per cent in the mid-2000s came in handy during the global financial crisis, when during a few hectic months “a small country of 5m people bought 0.5 per cent of the world’s stocks.” (The equity share has since been raised to 70 per cent.)
Before snapping up bargains in the crash, however, the fund’s market value fell by about a quarter. That was “an enormous stress on the system”, Slyngstad says, because nobody knew if politicians could live with such big nominal losses.
As it turned out, the fund thrived both financially and politically. I joke that it’s smart to step down with financial markets at record highs. Just then the waitress brings the monkfish and proceeds to cut it at the table. She wonders if we would like it better done. It emerges Slyngstad has given strict instructions not to overcook the fish — “monkfish can very quickly get too dry.” He discharges the waitress with a “this is really good”, shifts one half of the fish on to my plate, then serves himself. I can barely skim the wine list before he says “I bet you should go for that Pouilly-Fuissé.” If he has not got to pick stocks, he clearly knows how to choose a wine.
Picking up on my quip, he recounts an event last year to mark 50 years since Norway’s first oil was found. Three minutes before the ceremonial moment at 11am, he received a message: the oil fund had ticked above the symbolic NKr10tn mark. “The same day, I handed in my resignation.”
In investing, however, he doesn’t believe in market timing. I press him; surely the speed at which the fund loaded up on stocks after 2008 must have been a decision made at the top — a nerve-racking one, I surmise, given how transparently the nation’s wealth would depend on it.
Again, he deflects: “There is a desire not to have a structure where one individual has that much influence . . . We have to ensure that the role I have had does not turn into a role with the enormous underlying power it could have.”
I don’t think this is false modesty. The need to design self-managing, adaptive governance structures recurs throughout our conversation. It is at the heart of what Slyngstad believes leadership is about. It also smacks of a philosophical survival strategy for high-pressure moments. When the 2008 crash slashed the fund’s equity holdings, it fell to Slyngstad to decide whether and how fast to buy more stocks to restore the mandated share.
Slyngstad admits this was a difficult call, but says: “As long as you’re pretty sure you have done the right thing, it’s not so difficult to be in a crisis.” The democratic process, it turns out, can be an asset in hard times if it makes risks understood and accepted among the population.
It may also help anchor the fund’s approach to responsible investing — though Slyngstad says this has not yet been “tested” by any serious political fallout. Almost from the start, an external ethics council has excluded companies judged to violate basic ethical principles. The fund has also been a pioneer in taking environmental, social and governance (ESG) considerations when thinking about financial returns.
Slyngstad explains that the fund believes environmental unsustainability is also financially risky in the long run. It has divested from 300 companies it deems to have negative environmental “externalities” (such as palm oil producers) and directed some money actively to ones judged positive. These choices have turned out profitable — “so nobody can say we haven’t succeeded in that sense” because of ESG.
But the fund’s main tool for investing responsibly is asserting its influence as an owner. Under Slyngstad the fund has published a number of “expectation documents” setting out how it wants companies to be managed. The first, in 2008, concerned child labour. More have followed on issues from climate change and water management to corruption and tax transparency. He thinks they give boards a “way in” to taking ESG seriously: “if we ask you to measure your water consumption, maybe you become more aware and say, we can do this differently.”
The generous fish portions have cooled before we can finish them, but they are tasty enough that we do anyway. For dessert, Slyngstad orders the apple crumble, I the espresso panna cotta.
Can other investors learn from the oil fund’s approach? The question, Slyngstad replies, is who they are accountable to. “The big index managers — BlackRock, Vanguard, State Street . . . obviously have a big and increasing influence and share of global investments. But they have thousands of customers. How to deal with this is unbelievably difficult.”
But he thinks “they’re all there now” in accepting the need for some form of responsible investing. “You can’t manage other people’s money today without answering these questions.”
Notwithstanding his point about doing well while doing good, Slyngstad is unafraid of straightforwardly moral arguments. “As shareholders we have rights, but we also have duties,” he says. “If you own an apartment you may have duties to the co-op; if you own a building you have to prevent fire hazards.” His first hire for the fund’s ownership department was a moral philosopher, tasked with working out from first principles how to use the fund’s growing heft.
That was not the only time Slyngstad acted as an in-house entrepreneur. For the fund’s trading operations, he says he hired no traders, opting instead for mathematicians, which allowed the fund to leapfrog into electronic trading. His first equity analysts came “straight from school” because experienced ones “wouldn’t accept our salaries”. (Slyngstad himself was paid a grand total of £600,000 last year.) External index managers were quickly replaced by taking the job in-house.
As the desserts arrive, I say this reminds me of how Norway built up domestic knowhow in pumping oil out of the North Sea in the 1970s. He agrees: the fund realised “this will become so important we have to learn it for ourselves.”
As we finish up (coffee for him, fresh mint tea for me) I ask him about the big questions facing investors in the future. In a 50-year perspective, he believes technological change will drive continued globalisation and make the carbon transition profitable.
The bigger lesson he has to impart is about resilience. “There will be shocks,” he says, which can be good “because it forces people to think things through again”. But since we can’t predict them, we must ask: “If everything stops, what then? We need extra security buffers.” He told Bloomberg in 2014 that markets undervalued the risk of pandemics. So “when this crisis came, we could continue to trade for equally large amounts the very next day, with everyone working from home.”
He is coy about his own future. The official line has been that he will move to London to head up renewable energy investments for the fund. But it is unclear how that fits with his successor’s plans. For now his role as “global head of fund strategy” involves producing a series of reports about how the fund got to where it is. It looks uncannily like getting to write his own legacy.
I try to get him to open up by asking what he would advise a younger version of himself to do today. His answer surprises me. “If I were 22,” he says, “I would go into biomimicry” — the field of designing technology from models of natural behaviour.
I’m surprised, too, to hear him say that today’s young “must be the luckiest generation of all time”, because they enter a society which is changing ever faster — “and it will be very important changes, big changes”. Then it strikes me that this excitement about change is what gives an otherwise stern philosopher-investor his aura of optimism. “Some people don’t like change. [But] change has more upsides than downsides.”
Martin Sandbu is an FT economics commentator
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