Nicolai Tangen spends the week managing $1.4 trillion and his weekends coaching students online

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Ask someone on the street what they know about Norway’s sovereign-wealth fund, and chances are you’ll get a puzzled look in response. Ask anybody in the investment industry, and you’ll get some version of an expression of awe or respect.

That’s because the fund is one of the largest single pools of money on the planet, weighing in at $1.4 trillion as of today (you can see its value in real time here). Also known as the “oil fund” — it was created to invest Norway’s abundant petroleum income — this capital is invested in companies virtually everywhere. It owns about 1.5% of the entire global stockpile of stocks.

That translates into enormous sway over companies and their management worldwide.

Atop the fund is Nicolai Tangen, who took the reins last year after more than two decades as a hedge-fund manager. I interviewed his predecessor several times (once moving the S&P 500 based on a conversation we had — reinforcing, again, the fund’s clout), and recently I was able to grab time on Tangen’s calendar to chat.

Tangen will answer almost anything you ask him — a goal of his has been to make the fund more open and transparent to the world — and he delivers explanations in mostly abbreviated sentences. In speaking with others who know him, I’ve realized this only makes his communication style more potent. After all, his words govern the flow of $1.4 trillion.

Below are excerpts from our conversation.

Some would say you had it pretty good as a longtime hedge-fund manager. What attracted you to this role?

I had reached a stage in my life where I felt that I had done a lot of asset management, and had also done a degree in organizational psychology and development. I thought it would be amazing to combine those things, together with giving back to society.

For me, that all came together in this role. It allows me to use everything I’ve learned about finance, organizational development, and doing something for my country. So, it was the perfect job.

What role do you want the fund to have with the thousands of companies in which it’s invested around the world?

The main purpose we have, of course, is to make money. We now account for 25% of the state budget in Norway, so we are a very, very important financial contributor.

At the same time, we do have a mandate to work with the companies. We follow up on our so-called expectation documents, which tell how we expect our companies to behave in terms of climate, equality, tax planning, and these kind of things. Of course, it’s been a lot of focus on the climate side lately.

We have a big ownership group, which is responsible for the dialogue with all of our companies. We have now changed the way we vote — we vote at 12,000 AGMs a year — and from this year, we started to announce our voting intentions five days ahead of time. That’s quite revolutionary in terms of having an impact.

Do you subscribe to the view that companies with more environmentally sustainable practices perform better?

I think it’s a prerequisite for surviving in the future, that you have a sustainable business model. Otherwise you just don’t have a license to operate.

That has to do with the company purpose and why companies exist. I just don’t think they have a choice anymore.

Is the investment industry’s focus on ESG creating real change?

Yes, it is making real change.

But it’s one of several things that are necessary to solve the big problems we see in front of us. You need capitalism to change, and I think it is creating change in many ways. Of course, you also need regulation.

We need everybody to play on the same team.

The fund’s investment mandate comes from the government, but you have some flexibility in its execution. What are some approaches you’re taking to generate excess return in this environment?

I would say it’s fine-tuning things more than changing things. Because it was already a very well-run fund.

As you know, we run it relatively index-near. But there is more focus on exclusions, and not only for ESG reasons; also for accounting reasons and so on. So, there’s a bit more of exclusion than has been the case before.

We’ve upped the allocation to external managers a tiny bit — that’s been a very, very profitable part of our strategy.

And then I think the next step is to really put the learnings from mistakes into a system. We are developing what we call an investment simulator, which is an IT system where we put all the trades and so on, to get a feedback loop on the decision making that portfolio managers have.

How do you go about assembling your team and establishing, as you see it, an optimal culture?

First of all, we use LinkedIn! There we attract the best students and candidates.

I actually spend quite a bit of time on LinkedIn in direct contact with amazing students. I spend some of my weekends giving them career advice, sharing what I’m reading and thinking, all these kind of things.

And it’s a two-way communication. I met this amazing Ph.D. student from Oxford, who then came here to have a cup of coffee with me, and literally today she is interviewing with one of my colleagues to work with us.

We are also now portraying the oil fund more as the technology company that we are. Historically that has been an under-communicated part of what we do. We execute 36 million transactions a year, and so we are an important IT company in the country.

In terms of other values, we have a lot of focus on people at the center of everything that we do — making sure they have and they experience the intrinsic motivation one gets from working for one’s country.

We then try to upskill everybody across the organization during their time here.

Do you want your investment professionals to be tech-savvy? How else have the skills required to be successful in investing evolved over time?

I do think you have to be tech-savvy, yes.

But in my mind, what is more important as an investor than ever before is: One, you need to be long-term in your thinking. Two, you need to be contrarian — to be able to do the opposite of what everyone else may be doing at a given time. Three, you need to be resilient — to be able to handle the risk when everybody else gets nervous, which takes quite a bit of both guts and skill.

So, you need to be both stubborn and agile at the same time.

It’s that combination that is pretty rare, but highly valued.

How did the pandemic impact the nature of work at the fund? Will some changes stick?

Absolutely.

Thankfully we had everything in the cloud before this happened, so we could work from home offices. We had those 36 million transactions last year placed from various kitchens around town here and in London and in New York.

In terms of how we think this can impact us going forward: One, we think it can be easier to do more portfolio management from here in Oslo, because you can meet with corporate management teams around the world easier than you could in the past. And the second thing is flexible working. We now give people the opportunity to work two days a week from home or wherever they would like, around fixed meeting days in the office.

I think we’re looking at a completely different degree of flexibility going forward.

And that can be effective for new hires or entry-level team members?

I think it’s going to be a prerequisite to attract the best talent — that you’ve got some kind of flexibility.

As you look around the world, what’s top of mind for you and the investment team right now?

I would say two things. We’re looking at the degree of euphoria. With markets really panicky last year, we have entered a very euphoric phase, and we just need to consistently gauge the levels of euphoria.

And then, of course, the real threat is inflation. If inflation really takes off, that’s going to be bad news both for our bond portfolio and for the equity portfolio. So, that’s where we have the laser focus.

At home in Norway, the fund is always under the spotlight. But across the continent too, regulators and politicians are focusing on investment practices more than ever, right?

There is a whole range of issues — you name them, we have them. It’s political; it’s regulatory; it’s geopolitical. I think that’s just business as usual, Devin.

There are always tons of things to worry about. Worry is my middle name.

You mentioned you spend your weekends communicating with students on LinkedIn. What are you telling them most often?

Think outside the box. Show that you can take some risks. Broaden out, and make sure you stand out.

I think the more you know, the more fun you have in life.

The more fun you have, the more interesting you are as a person. The more interesting you are, the better job you’re going to get.

Join the conversation with your own take on these topics in the comments below.