Norway’s oil fund fears market disconnect from real economy

FT - Save Richard Milne in Oslo 18 Aug 2020

Concerns raised after $1tn sovereign wealth fund records second-best quarter

Norway’s $1tn oil fund has recorded the second-best quarter in its history because of a strong recovery in stock markets but has said it is worried about the disconnect between markets and the real economy. The world’s largest sovereign wealth fund returned 13.1 per cent in the second quarter, following its biggest ever percentage fall in the first three months of 2020 when it dropped 14.6 per cent. Trond Grande, deputy chief executive of Norges Bank Investment Management, which manages the fund, said its value had continued to recover over the summer and it was now flat or slightly up for the year as a whole.

Asked if he was concerned by the disconnect between markets and the economy over Covid-19, Mr Grande told the Financial Times: “Yes, I think it’s something to have on the radar. We’ve seen an unexpectedly sharp recovery in the financial markets but maybe we haven’t seen the full effect on the real economy.” He added: “That said, we often see disconnects between the two. At some stage, and in the long run, you would expect them to be equalised.” Mr Grande told a press conference that the pandemic “doesn’t seem to be under control in any shape or form”.

The fund is currently in the midst of the biggest political storm in its history over the botched appointment of a new chief executive. Recommended Person in the News Nicolai Tangen, next chief of Norway’s sovereign wealth fund Norway’s parliament is considering whether to try to block Nicolai Tangen, a former hedge fund manager, from becoming chief executive because of alleged conflicts of interest. All the opposition leftwing parties have come out against Mr Tangen as long as he retains ownership of AKO Capital, the London-based hedge fund he founded and where he owns a 43 per cent stake. Norway’s largest political group, the Labour party, which could win next year’s elections, has expressed its concerns about Mr Tangen in unusually strong terms.

Mr Tangen declined to comment on the mounting opposition. Mr Grande said he had not heard any concerns “directly” from business partners about the row. But he added: “Obviously it’s something you would have wanted to avoid. Hopefully we have built a reputation over more than 20 years that can withstand some turmoil.” The fund’s deputy chief executive also applied to succeed Yngve Slyngstad, who has been chief executive of NBIM since 2008. He refused to say how he felt about missing out on the job.

Asked if he was ready to become interim chief executive if Mr Tangen could not be confirmed by September 1, he said it was a “hypothetical question” and that the fund was planning for Mr Tangen to take over.

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