Norway’s Sovereign Wealth Fund Selects New Chief Executive

Nicolai Tangen, a hedge fund manager based in London, will take over the nearly $1 trillion plan. 

Norway’s sovereign wealth fund—the largest in the world—has chosen a hedge fund operator to take over the system. 

Nicolai Tangen, a Norwegian who is the London-based chief executive at AKO Capital, will head Norges Bank Investment Management, starting in September. The firm runs the Government Pension Fund Global (GPFG), the sovereign wealth fund valued at nearly $1 trillion. 

“Tangen has built up one of Europe’s leading investment firms and has delivered very good financial results as an international investment manager,” said Øystein Olsen, chair of the executive board. 

“He has extensive experience with equity management, which is the fund’s largest asset class,” Olsen added. 

Want the latest institutional investment industry
news and insights? Sign up for CIO newsletters.

Tangen will be taking the mantle from Yngve Slyngstad, who said in October that he is stepping down after roughly 12 years leading the fund. Last year, the Norwegian plan increased about 20%, returning a record $180 billion, thanks largely to positive equity gains under the former chief executive. 

But the sovereign fund is currently worth about $958 billion, down 10% from $1.07 trillion at the end of its 2019 fiscal year, hit by market losses from the coronavirus pandemic. Earlier this month, the central bank decided to draw down its oil revenues from the GPFG as part of its fiscal response to the outbreak. 

Tangen was chosen out of eight applicants, including the deputy CEO Trond Grande. The central bank did not disclose Tangen’s application during the recruitment process.

The hedge fund manager, who has lived in London for nearly 30 years, will relocate to Oslo and pay taxes to Norway after he takes up the position. 

Related Stories: 

Norway’s Pension Fund Rakes in Record $180 Billion Return for 2019

Norges Bank Draws Down Oil Revenues to Ease Coronavirus Impact

Norges Bank CEO to Resign, Pension Fund Returns 1.6% in Q3

Tags: , , , , , , , ,

Are Stocks a Bargain Buy Worth Taking?

Value star Bill Nygren thinks so. Hey, despite that latest pop-up, the market is still way down last month’s peak.

Legendary value investor Bill Nygren knows when stocks are cheap. That’s why he thinks now is a great time to buy. Is he right?

“We think stocks are really cheap if you believe, as we do, that the economy is going to eventually recover, as will the P/E multiples,” he said. He draws the distinction between stocks that fall because they’re no damn good and those that fall because of one-time circumstances. Like the current coronavirus-shaken market.

As investors consider which equities to buy, they must make an important distinction between one-time occurrences for a company and changes to long-term earnings estimates, Nygren said. “Long-term changes, then you have to think about applying a P/E multiple to those changes,” he said.

“If you’re just talking about something that’s a one-time hit, then obviously the multiplier on that is just one,” Nygren told CNBC. 

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news.

Certainly, Nygren is onto something. The price-earnings (P/E) ratio for the S&P 500 finished Thursday’s session at 19.8, a lot lower than the 25 level of January, after an epic bull run. And the Thursday finish came after a recovery—at least for the moment—of the market, crowned by yesterday’s 6.2% rise. The enormous $2 trillion aid package making its way through Washington gave investors heart.

Some Wall Street pundits are wondering whether this past week’s seeming resurgence is merely what’s whimsically called “a dead cat bounce.” In other words, a brief increase before another painful slide. Some say short covering is a factor. That is, investors who bet on a continued market tumble suddenly had to buy back stock they borrowed for their wager and return it.

Still, it’s remarkable that the lowering of the once swollen P/E has coincided with the dip of another, more long-term valuation metric. That would be the cyclically adjusted price-to-earnings ratio, commonly known as CAPE, the brainchild of Yale economist Robert Shiller. This tracks data 10 years back and adjusts for inflation, to give a better reading of the market’s valuation.

For some time, the CAPE has stood above 30. But only recently has it trended down again. In other words, the impact of the virus on stocks has been so profound that it has shifted around the market’s basic gravity. And absent a miracle cure for the disease tomorrow, why should that downward dynamic suddenly vanish?

Indeed, the current market hop still leaves the index far below its Feb. 19 peak. It sits at 22% below that high mark, still in bear territory.

Nygren’s Oakmark Select Investor mutual fund has taken a beating from the current downturn, off 33%, worse than the S&P 500. Not helping is his strong allocation to financial services stocks, which comprise a third of the portfolio.

The fund also got torched in the horrible year of 2018, coming in with losses worse than the market. That said, Nygren, who is a partner at Harris Associates, which runs Oakmark funds, has a very good long-term record.

“So we think there are a lot of attractive values if you believe the economy is eventually going to get better,” he said. 

Related Stories:

As Virus Punishes Stocks, El-Erian Warns: Don’t Buy the Dips

Energy Stocks Are Doomed, Warns Savant Jeremy Grantham

Crisis Creates New Class of High-Yielding Stocks

Tags: , , , , , , ,

«