Pod Insights Capital Allocators CIO Greatest Hits: Sovereign Wealth Funds – Nicolai Tangen (Norges Bank) About this episode This week's Summer Series is Nicolai Tangen, the leader of the largest sovereign wealth fund, Norges Bank Investment Management. Nicolai joined Norway's $1.5 trillion pool five years ago after a stellar career in the hedge fund world. He has done a remarkable job as a universal owner of assets, dramatically increasing transparency with his constituents, including on his terrific podcast – In Good Company.
Original Release Date: December 4, 2023
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0:01 Ted Seides? Capital Allocators is brought to you by AlphaSense. Every allocator sits at their desk for hours preparing the work around investment decisions, getting up to speed on a new theme, prepping for the next investment committee meeting, and tracking what changes across an entire portfolio. AlphaSense just launched something built to help. It's called SuperAnalyst, an always-on agent that works like a power user on your behalf. It draws on over 500 million premium sources, including broker research, expert transcripts, company filings, and earnings calls, and keeps working long after you've gone home for the day. Point SuperAnalyst at a theme, company, or market, and it learns the coverage universe
0:46 Ted Seides? so you can easily turn new insights into the briefs, models, and memos you'd otherwise build by hand. It was designed to work like an extension of your team, so it remembers your projects, follows your templates and processes, and links every output to its source so you can see where each conclusion came from. The best way to judge its quality is to give it a whirl. Pick the research task on your desk before your next committee meeting and hand it to SuperAnalyst. Start a free trial at alphasense.com/capital and see what it has ready for you. Capital Allocators is also brought to you by RidgeLine, the investment management platform
1:29 Ted Seides? built for firms who are rethinking how work gets done. You're at your desk looking at a line graph of your firm's growth. The line is moving sideways, linear growth, and you know exactly why. You're constrained by your operational bandwidth that's been the same for so long, it just feels like the cost of doing business. RidgeLine is built to change that line's trajectory, to be the inflection point that takes your growth from incremental to accelerated with the team you already have in place. RidgeLine is the only AI-native investment management platform that brings together the front, middle, and back office with one set of data and powerful AI agents that automate
2:12 Ted Seides? away operational drudgery, so your talent can shift from managing old technology to materializing new ideas. RidgeLine helps asset and wealth managers understand and improve their firm's growth trajectory. To see how your firm compares to 16,000 of your peers, visit ridgeline.ai/trajectory. If you file Form ADV, your firm is already there. Then talk to RidgeLine about how you can do more with the team you already have. Capital Allocators is also brought to you by Juniper Square, the operations partner trusted by the leading private market GPs. One theme that keeps coming up on the show is GPs that build the strongest and most durable
2:57 Ted Seides? relationships with LPs are the ones that have both strong returns and strong operations. AI raises the stakes on operations, and having Juniper Square as your operations partner helps ensure your data is organized, accurate, and accessible, so you can unlock operational alpha. That's why thousands of GPs trust Juniper Square. Learn more at junipersquare.com/capitalallocators.
3:32 Ted Seides? Hello, I'm Ted Seides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation. Through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can join our mailing list and access premium content at capitalallocators.com.
3:59 Speaker 01 All opinions expressed by TED and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators or podcast guests may maintain positions in securities discussed on this podcast.
4:18 Ted Seides? With eight years and over 500 podcasts under my belt, I'm often asked to recommend my favorite episode. But I can't really answer that question. I feel like I have 500 children and don't think I've disowned a single one. So when asked, I usually offer up a great recent episode to get a listener started. Finding the best episodes in a big library of content isn't easy, so we thought we'd help. Each summer going forward, we're going to share our best. Over seven weeks, we'll replay conversations curated from our favorites and yours, excluding those from the last 12 months. Our 2025 summer series focuses on CIOs.
5:03 Ted Seides? We're blessed to have an incredible library of long shelf life content, and we just couldn't pick seven. Instead, we'll share a dozen gems canvassing every type of institutional asset owner. This week's summer series continues with Nicolai Tangen, the leader of the largest sovereign wealth fund in the world, Argus Bank Investment Management. Nicolai joined Norway's $1.5 trillion pool five years ago after a stellar career in the hedge fund world. He's done a remarkable job as a universal owner of assets, dramatically increasing transparency with his constituents, including on his terrific podcast, "In Good Company."
5:47 Ted Seides? Before we get going, it's about that time of year when the summer breeds leisure activities. So whether you're an active participant or a fan, you've likely noticed a few memes spreading recently. First, there was Bill Ackman making his professional tennis debut. Now, Bill's a solid player, right around the same level as me. But tennis has different levels. My level of play puts me squarely at the bottom of the A-team at my club. My club's A-team is fairly even with the C-team at another local club. And that club has players like Peter Brosens at Jordan Park and John Pastel at Alliance Bernstein, who destroy everyone else at their club.
6:29 Ted Seides? John and Pete probably can't take a game off of Elliot Spaziri, a local kid who's now 132 in the world. And you don't see Elliot making it that far at the tennis majors. That's another level. I've often described Jen Prosek as a major league communications entrepreneur competing with little leaguers. It's kind of the same with tennis. So, no ill will towards Bill, but jumping levels is tough to watch. And then there was the infamous Kiss Cam at the Coldplay concert. One moment in time, one poor reaction, and hundreds of thousands of replays already. If there's a moral to these stories, it's sometimes you have to stay in your lane.
7:10 Ted Seides? You might see me hit some balls at a Pro-Am, but I'm not going to compete against pros, let alone head-to-head against Brosens or Pastel. And to the extent you see me on a Kiss Cam, that'll definitely be with my wife Vanessa. As for staying in your lane with content, what better way than sticking with the leading voices of institutional investing right here at Capital Allocators? Thanks so much for spreading the word. Please enjoy my conversation with Nikolai Tangen from 2023.
7:42 Speaker 02 Nikolai, great to see you. Thank you, great to see you too. Why don't you take me back to your first learnings about research and interviewing?
7:52 Speaker 03 The first time I started to think about interviewing was when I was in the Norwegian intelligence service. And as part of the program there, we did some training in interviewing. I guess it was called interrogation at that stage, but now it's not such a popular word. You just thought what you could get out of people if you asked the right questions and the right follow-up questions and right preparation level and so on. And it just struck me, that was a really, really important thing. When I set up BAKO, I thought, you know what, we probably can get more out of companies than other people. And we started to train the analysts in interview technique or interrogation or whatever you call it. Got the leading interrogator from the Norwegian police force to set up a course. We hired an English person who was superb and who had helped develop the whole interrogation framework for the English police force.
8:37 Speaker 03 And together they made a program. And it was the best program that money could not buy because there wasn't anything really available. And it's really important. Imagine the people who spend the time talking to other people like lawyers, doctors and so on, and they've got no training in how to ask questions. So it's a really powerful thing.
8:56 Speaker 02 What are some of the key lessons you learned?
8:59 Speaker 03 The thing is that you are very good at it, but it has to do with preparation work. Ask simple questions. Don't build too much into the question. Don't try to show the other person that you are an intelligent guy. Just ask simple questions. They'll realize soon enough that you have done your homework. Don't ask double questions and just keep it short and drill down, follow up on some of the answers.
9:21 Speaker 02 Once you've learned some of those things in Norwegian intelligence, how did that take you to a path to investing?
9:26 Speaker 03 I started to study economics in Norway and then went to Wharton, studied there, worked five years as a researcher and then went on to a hedge fund. And then it was after that that I set up my company. That's when I really started to develop these things.
9:40 Speaker 02 I'd love to hear about your formative experience learning in the business.
9:43 Speaker 03 Yes. The first place I worked was called Kazanov. It was an old brokerage house, research outfit, later bought by J P Morgan. It was a fantastic acquisition by J P Morgan when they did it. And I worked with a guy called David Croft, who ran the European apartment, a super guy who Set down with me, taught me to build models, taught me to ask questions, really taught me everything I knew about analysis.
10:09 Speaker 02 How long did you stay there before going over to the buy side?
10:12 Speaker 03 Five years. I worked at a hedge fund called Edgerton Capital, was one of the first hedge funds in Europe, was ran by and started by John Armitage and Bill Bolinger, really superb people. We talk about triple A in financial markets. I think if you talk about people, they are really triple A plus. And I think we underestimate how important apprenticeship is for investing. And starting a firm is not something you can just do. You need to learn from something. You need to have credibility. You need to know what you do. You need to know about risks. You need to know about how to treat clients, all these kind of things. It's not something you just come up with. You need to learn it from somebody. And John and Bill were just really instrumental in teaching me these kind of things.
10:52 Speaker 02 So in that time at Edgerton, what did you learn about equity research that was different from what you'd experienced before?
10:58 Speaker 03 I would say John Armitage is an extremely thorough guy with incomprehensible work ethic and drive and a unique understanding for business models and what make companies successful, very good with people. So I would say the most important thing was probably to learn what is a good business, what are important modes, what is operational leverage, what does it really mean? How much of your incremental revenue drops down to the bottom line, these kind of things, the importance of balance sheets and strong balance sheets. And just how to just ask questions and follow up with companies. That was a huge learning. Bill Bolinger, he was a bit more on the risk side. I learned a ton from him as well. But I think another thing which is important is you have to make hay when the sun is shining. It's the easiest thing is just to hedge away all types of risks.
11:41 Speaker 03 It's to hide, it's to spend all your money on put options to just protect your downside. But there were all times where you just have to run naked. You have to take away the protection. You have to have market risks. And that's a real skill set, when to take away the brakes and go for it. Because there are some periods where you make all the money and you have to be in the market then.
12:00 Speaker 02 What did you find were some of the predictors of those periods?
12:03 Speaker 03 Fear, when the people were really, really fearful. And that's something that I have known also subsequently. We did it at AKO, we did it during the financial crisis. Because you need to have max exposure when the world looks the worst. When you are at the bottom and you are the most afraid and you can hardly sleep. That's when you need to take your protection away. It's very counterintuitive and it's very, very tough.
12:26 Speaker 02 Alongside of being naturally contrarian, which is what you're talking about in taking risk. You have to run a business that sustains through those periods. What did you see at Edgerton about how to run a successful hedge fund business?
12:39 Speaker 03 Client first. Just think about clients. There was ever a question, you've got to allocate a profit between the client and yourself you give to the client. Always those kind of things and honesty and transparency. Clients, they want to hear the truth. Clients in the financial business are very clever. They are seriously not stupid. They understand that things go up and down. You are really truthful, their tolerance for volatility increases.
13:04 Speaker 02 Were there any examples of times where it wasn't so obvious that being honest and transparent was the right thing?
13:12 Speaker 03 No, I think it's always obvious. I mean, if you're a long-term thinker, it's not only obvious, it's the right thing to do. You have a true north, right? You have values. It's just always right, to be honest.
13:23 Speaker 02 How did you get to the point in time where you decided it was time for you to move on?
13:28 Speaker 03 I had been well-paid at Edgerton. It just felt right for them and for me to move on. And that's what I did. And they were also instrumental in helping me set up AKO Capital when we did that after five years.
13:42 Speaker 02 In between working at a hedge fund and starting your company, if I remember right, you took a little break to study.
13:49 Speaker 03 I did three years. Ticked off a lot of the cool stuff I always wanted to learn, cooking, diving and so on. But I also spent two years studying art history and that was a tremendous thing to do. Why did you want to study art history? Because I had collected art for a long time and I had read a lot of books. And I just felt that need to put it into some kind of system. When you work in an investment company, your intention span is roughly like two seconds. And spending time in the library studying pictures and paintings, it took it back up to two hours. Now, having had a break for three years, I realized that I was studying art history. I was okay at looking at paintings, but I was probably better at looking at stocks. I was a really pedestrian art historian. I decided to set up A K O. Managed to hire some really good people.
14:32 Speaker 03 First person I hired was the secretary I had at Edson. She was phenomenal, Nikki Staples. And then Gorm Thomsen, Norwegian fellow. And then we built up a team. We were like seven people, seven people and a dog. And we raised five hundred and fifty million dollars. It was a very good launch, got some fantastic investors and then built from there. And when I left fifteen years later, it was north of twenty billion or something like that. For perspective, what was A K O's strategy? It started off as a mid-cap, deep research firm. Gradually moved a bit larger caps because we thought that the research methodology worked for large companies as well. Then increasingly became quality investing focused.
15:13 Speaker 03 And we hired some people who really brought that philosophy into the firm, who had different types of backgrounds, one from had been at McKinsey. And we just saw that over time, the quality companies just surprised on the upside. The bad companies just always had profit warnings, bad surprises, bad management changes, these kind of things. But the good ones, hey, you know what? Always something great. They pull some kind of rabbit out of the hat and surprise to the upside. When times were bad, they made some clever acquisitions, came out of it even better. And so to me, quality investing is really important. How did you think about risk-taking? At that stage, we were running probably at two-thirds market risk. We put option protection on the down side, so always lower risk than the market, but performing the markets and compounding over time.
15:58 Speaker 03 Compounding is just completely underrated. Very few people think probably long term.
16:03 Speaker 02 In addition to bringing in these outside interviewing experts and building up this capability to understand how to ask questions, what are some of the other things you brought to your research process that helped you get better at what you were doing?
16:17 Speaker 03 In addition to interviewing, we brought in forensic accounting group, really important. And that we have in the Norwegian Southern Wealth Fund as well, we brought that in. We brought in forensic linguists, important again to understand conference call transcripts and meetings and so on, very deep market research. So a big team of telephone interviewers and then data scientists and analysts. So really trying to combine a lot of different categories and a lot of different skillsets into making a unique research proposition.
16:48 Speaker 02 Alongside the investment strategy, investment team, how did you think about the culture of the organization at AKO?
16:55 Speaker 03 So when you build an organization from scratch, you don't really think about the culture because culture is just an extension of the way you think, right? It's very different to build a culture from scratch and then inherent a company or inherent the leadership of a company and trying to make a corporate culture. So I never really thought about corporate culture as a thing at AKO, but it was a combination of hard work, honesty, deep research, being honest with yourself in terms of decisions, being able to change your mind when facts changed, transparency, client first, these kind of things. I thought corporate culture was so interesting because it is really fascinating. You have two companies, they do on the surface exactly the same thing. One of them is successful, the other one is a failure. What is it? You see it, of course, to the extreme in banking.
17:39 Speaker 03 They supposedly do the same thing, but some people succeed and some people don't. And it's fast, right? It's happening fast, but it's happening in all industries. You see it in the elevator industry, you see it in the footwear industry, I mean, you name it, you see it in the cosmetics industry, some companies are doing well, some companies are not. What is it? So corporate culture, really fascinating. So after a while at AKO, I did a master's degree in socio psychology and studied corporate culture and I just absolutely loved it. It's so important.
18:07 Speaker 02 What did you find in your research, both within A K O and studying, that gives you some understanding of what makes successful corporate cultures?
18:17 Speaker 03 It's a whole range of things. It comes from the top. When you take over a company, it takes a long time to change, at least five years, probably five to 10 years to make a difference. And it's called corporate culture for a reason, right? It's really ingrained in everything you do. And one definition on corporate culture is just how do we do things around here? And you can see it in so many different things. It's hugely fascinating. Analysts don't spend enough time on it because they think it's too long term. But it does change businesses, sometimes within a five year timeframe. And also, it is the thing that CEOs would love to talk about. It's what's on their mind. They don't like to sit there and talk about the next quarter. They couldn't give a toss. They're not interested in it. They think it's a waste of the time. They think you are a boring guy. They want to talk about corporate culture.
19:02 Speaker 03 They want to talk about what makes this organization tick. How can we pull away from the rest of the guys? That's what they want to focus in on. But do you think the normal analysts spend any time on it? Of course not.
19:11 Speaker 02 What are the types of questions you would ask to tease out the characteristics of the culture that allow you to understand the differences between two companies?
19:20 Speaker 03 So the type of questions I ask is exactly the type of questions I ask on the podcast in Good Company. A tiny bit of advertisement for that, if you don't mind terribly. And please don't cut this out, Ted. We have a podcast in the fund and it struck me, hey, because we got a lot of money, we managed to talk to the CEO of the biggest companies in the world. And so we've talked to the biggest bank CEOs, the biggest tech CEOs, Sam Altman, Bill Gates, all these kind of things. And what I asked them is basically, in addition to why is your business good? It's what makes you tick? What is your corporate culture? What are you trying to change? And so on. And these are just really fascinating questions and I spend a lot of time on it.
19:54 Speaker 02 When you spend a lot of time building up what became very successful $20 billion asset management organization, you've built the culture, you have portfolios of companies that you think are some of the best in the world. How do you leave that?
20:08 Speaker 03 I felt that the learning had flattened out a bit. I felt that it was time to pass it on to the next generation. We had spent a lot of time on preparing the rest of the team to take over. I had probably spent eight years preparing their transition. And I just wanted to move on and do something else. I really feel that life is very short and that we need to learn and that we need to experience as much as we can whilst we are still here. And we are not here for long. And AKO had been very successful. I thought if I could leave that to the next generation in a successful way, that would be fantastic because that rarely happens in this industry. And then I could go on to do something else. Now, I wanted to go back to university to study full time. I thought, hey, you know what? I'm going to Ikea. I'm going to buy some cheap furniture.
20:50 Speaker 03 I'm going to rent a flat. I'm going to go to jazz clubs every night. I'm going to be a student again. And hey, that's the best thing you can do. So then this job in the Sovereign Wealth Fund came up and destroyed that whole dream. And why did I think that job was cool? First of all, I love asset management. I think finance is the most fun thing you can do. If you think about what is it to be doing asset management? Everything you eat, wear, drive, consume, it's made by a company. It's the corporate culture, we'll talk about that. It's the market with greed and fear. It's geopolitics, it's defense, it's technology, progress, all these things. And it changes all the time. You could not invent a more interesting game if you tried. And if you're good at it, you even make some money. So it's a fantastically fascinating thing to do.
21:35 Speaker 03 I love that. And then, of course, this job here in the Norwegian Sovereign Wealth Fund is about running capital. It's about continuing to build the organization from a great starting point, which I love. How do you motivate people? How do you increase the transparency, all these kind of things? And then also doing something great for the country. I've been quite concerned about philanthropy generally and been spending a lot of time on it. This job just combined my three things.
21:58 Speaker 02 I'd love to go into the history of this pool of assets. It's not an old pool, as it turns out. So how did the Sovereign Wealth Fund come about?
22:07 Speaker 03 It's an amazing story. And to really understand the background here, you have to go out to the North Sea. A cold, wet day in October sixty nine. You have to go aboard the drilling rig Ocean Viking and they were drilling the last well in the North Sea. And if they didn't find oil, they would pack up the toys and go home. And two in the morning, this guy, Sal Wissens, was told to wake up the platform chief, Ed Seaburn. And Ed Seaburn was really fed up. He was just like, Sal Wissens, why do you wake me up two in the morning? You better have a good reason. And did he have a good reason? They had just struck oil, Ekofisk, the biggest offshore oil find ever. And this was announced then to the Norwegian population the day before Christmas Eve sixty nine. And wow, what a Christmas gift, you probably will say, but hey, not necessarily.
22:52 Speaker 03 In a lot of countries, it had been a curse because it had led to corruption, crowning out of industries and these kind of things. But then Norwegian politicians did something really clever. They decided to set up this fund. First deposit, two billion Norwegian kroner, has grown to fifteen thousand billion. It's been just an unbelievable travel. Very good fit work from the politicians, the Ministry of Finance had done a very important job, the people who worked on the fund and so on. It's been an amazing journey and now the fund is the biggest single shareholder in the world. One and a half percent of all the equities worldwide in nine thousand companies. In Europe, we own two point seven percent of all companies. It's just been incredible.
23:29 Speaker 02 When did the fund actually get set up?
23:31 Speaker 03 Twenty seven years ago.
23:32 Speaker 02 And what was the stated objective?
23:35 Speaker 03 To preserve and build wealth for future generations.
23:38 Speaker 02 After that initial infusion from the oil discovery, how's the fund set up in terms of either contributions or distributions since then?
23:47 Speaker 03 We get the oil and gas revenues that comes into the state. And then we have a spending rule so that the politicians can take out roughly three percent of the fund. And all this is politically anchored in the parliament. That's really important to have this democratic anchoring. But even with three percent of the fund being spent, that is now more than twenty percent of the Norwegian budget. So it's very important.
24:10 Speaker 02 And is that a net three percent outflow?
24:13 Speaker 03 No, it's for the moment, we basically get more in than we pay out. And that's generally been the case, apart from during Covid where the spending was a bit higher.
24:24 Speaker 02 As you mentioned so many times, when there's some type of sudden wealth, whether it's a country, a family, an institution, it doesn't go well. How did the government set up the governance structure of this pool of capital to allow it to succeed?
24:38 Speaker 03 Yeah, it's a very good question. So these type of funds typically don't last for a very long period of time. The fund is owned by the Norwegian people in a way. It's taken care of by the parliament. The mandate is given to the Ministry of Finance. They give it to the central bank and then we sit in. Side the central bank, so they give the mandate to us. So it's a pretty complicated governance structure, but it works really well. And it means that we are in a way, a couple of steps away from the politics. We are not a political fund. We are not used as a political tool. Very important. We have one overriding goal. It's to make money. But we also are making money in a sustainable way. So ESG is important for us.
25:17 Speaker 02 When that mandate gets translated to you through these various government entities, how does that come down to what your mandate ends up being as you deploy that into markets?
25:28 Speaker 03 The Ministry of Finance is doing a really good job in defining the mandate. So we have a pretty strict mandate in terms of how the asset allocation should be. There is also a risk budget attached to that. So that tells us how far away from the benchmark we can be. And that's how we need to operate. So the broad risk parameters are set and anchored politically. And then we try to get some excess returns out of that.
25:54 Speaker 02 So I'd love to walk through both of those. So what's that asset allocation as it's handed down to you?
25:59 Speaker 03 In broad terms, it's a seventy thirty asset allocation. We can also do a property. We can do renewable infrastructure and we do both of those. Then the risk budget is basically defined as a tracking error budget. In two out of three years, how far from the index can you be?
26:15 Speaker 02 And what does that range?
26:17 Speaker 03 One point two percent. So we are an index near fund. And I think it's really important because when a fund is this big, if we were to lose a lot of relative money, like big time, I'd lose my job, right? You don't survive that. The problem is that you are being kicked out at the worst possible time. And typically then you would liquidate the positions and crystallize losses which shouldn't be crystallized. And that is why it's important to be close to index. Because a governance structure cannot survive if the leadership of the fund takes too big risks.
26:49 Speaker 02 How have you staffed the organization to go out and pursue that strategy?
26:54 Speaker 03 So first of all, I haven't staffed it myself. I've been there for three years. Okay. So we were already full of fantastic people, really brilliant people. It's a very small organization. A third of the size of what similar institutions would be given the asset size. We are 650 people, 650 people running 1.3 trillion. We don't have secretaries. We book our own tickets, own flights. You come and visit me in Oslo, you come into my office and think, gee, I thought you guys were running a lot of money. It's really laser focus on costs. And that's important because it does something with the mindset. And we are a public institution and we have to behave thereafter. And that's important.
27:35 Speaker 03 We have a large proportion which is run close to the index. There is an active element to all the strategies we run. So even the index near funds, we'd have different types of overlays and different types of long-term trades on. And then we have part of the pool which we are running in a more active way. And it's important to do active asset management because it's also tied into active ownership. Because we have dialogue with the companies, we have 3,000 company meetings a year. We have clear expectations to how the companies should behave. We vote at the AGMs and so on. So that active part is important.
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28:55 Ted Seides? And now, back to the show.
28:59 Speaker 02 When you start with your lens at AKO, which is obviously a far more concentrated portfolio, and then think about active risk in the context of the largest pool in the world, how do you decide what and how much to take that active risk?
29:15 Speaker 03 The risk-taking in this fund is very delegated. So we have a lot of people running various mandates. One of the cool things working here is that you get responsibility early. You can end up after three years to run a billion dollars. So really great place to start because you get responsibility early and you are being trained by your colleagues. That's really important. Then we can, at the leader group level, also take some different types of risks. So we did, for instance, have a shorter duration than the market over the last few years. That's saved us quite a bit of money. So we can put on those type of positions as well. We don't do it very often. I think they need to be pretty fat pitches. They need to be situations where you think you are 65% and 70% likely to be successful.
30:00 Speaker 03 So you don't see many of them.
30:02 Speaker 02 How does the composition of the 650 people on your team break down between functional roles?
30:08 Speaker 03 Yeah, first geographically, half of them would be in Oslo. We have big offices in London, New York, Singapore, some smaller offices in Paris and Tokyo. We have a real estate team. We have a large and very good fixed income team. We have equity, active research. We have the more index-like. We have more than 100 people in technology. Big effort now on AI and doing really well there. Compliance, of course. So I would say the normal functions.
30:34 Speaker 02 How do you think about the balance between internal management and external management?
30:39 Speaker 03 We run 5% of the assets with external managers, and that's the assets that we have in developing markets. In developing markets, we think it's very complicated to build up your own expertise because we are in so many different countries. So we typically use managers there. It's been a very successful part of our strategy. They generated consistent access returns for us. We, of course, pay higher fees, and high fees is not a good thing in Norway. So we need to be sure that there is significant returns of the fees, and it has been consistently.
31:09 Speaker 02 How have you decided to pursue that emerging market strategy?
31:13 Speaker 03 It's been a combination of things. We have a really superb team who's been doing this for a long time now. We've got a great methodology in place. It's a team of eight. They're doing it just like a super job, identifying the right people, staying with them for a long period of time, getting to know the investment philosophy and supporting them as organizations.
31:31 Speaker 02 Does the team have a bias for the types of external organizations you like to partner with?
31:36 Speaker 03 Small teams, small organizations, or small teams within some larger organizations. High-duration relationships. We like to be important partners. So we are, in some cases, quite large parts of the area.
31:49 Speaker 02 I'm wondering how that math works when even 5% of your pool is $65, $70 billion in the US. How do you invest in smaller teams and funds when you're deploying that much money into emerging markets?
32:01 Speaker 03 You know this because you've been in this business yourself. We have roughly 100 relationships, so we spread it out.
32:07 Speaker 02 I'm curious to get your sense of the differences in the depth of research that you saw when you're more focused at AKO compared to across 9,000 companies in your equity portfolio at the Sauter-Moth Fund.
32:22 Speaker 03 We do not research 9,000 companies. We research less than 1,000, but we do research them very well. Do we research them better or worse than what we did in my previous life? I think it's very difficult to compare a different type of research.
32:37 Speaker 02 How do you define those two different types of research?
32:40 Speaker 03 There are some similarities and some differences. One of the things, when you come into a large organization like this, you cannot change the investment philosophy overnight. I can't say, "Hi, guys. Today, we are going to start to invest in quality investing. Everything you buy should have a certain growth rate and it should have a certain return on investment. Otherwise, we don't want to buy it." Okay, so you tell that to somebody who's got a mandate, and then they underperform. Now, whose fault is that? That's your fault, right? It's not their fault. So you cannot do that. So people have to choose the way they invest themselves. And the philosophy in the fund has always been that there are many ways to skin the cat. You find the way that suits you, and that's how you go about it. Now, and then, I'm trying to get people to become even more long-term in what they do.
33:23 Speaker 03 And even more focused, but in particular, the timeframe I think is very important. And I really don't like frequent trading. I think you should trade as little as you can. It's very costly to trade because of friction costs. You move prices against you and very often you add little value. And then the more decisions you take, the worse they tend to be. You make one decision per month, probably quite good. Make 10 a day, probably not very good.
33:48 Speaker 02 When you add all this up at the asset size you are, even with taking some active risk, there's no way of getting away from being effectively a universal owner of equities. One of the things you didn't mention is the world of private markets, which has become a growing part, certainly in the developed markets of capital formation and businesses. I'm curious how you've thought about accessing that part of being a universal owner.
34:13 Speaker 03 Private equity has not been a part of the mandate we have. And we are in active conversation with the Ministry of Finance to potentially get that in. And this is a decision by the board and we will soon make our recommendation. And then we see whether we get it through the system or not. I think the arguments for doing it is that more and more of the value creation takes place outside the listed market. Companies are owned longer by private equity than they have been in the past. They are bigger when they get to the market and we automatically buy one and a half percent of them when they come, because that's what we own of the world. So a lot of that juicing has already been done when these oranges or lemons come. And I think it's right to take part of it also because that market is growing bigger. It's getting close to 10% of the size of the world stock markets. And I think it's pretty clear that there was some excess returns there.
34:58 Speaker 03 The ESG aspects have improved, liquidity has improved, transparency has improved. Fees have come down through co-investments and so on. So I think there is this pretty strong argument for it. But as I said, this is not my decision. This is a decision by the board and the ministry. We have the infrastructure to cope with it. We have the sector analysts, we have the capital market specialists, we have the relationships, we have people who have picked external managers. I think we have the corporate culture for it. We have the legal framework for it. It would take very little extra people. And also, we are the only large fund in the world of our type who are not doing it. It's a bit like when you start out in competition in orienteering or whatever, right? And everybody runs in one direction and you're the only one who run in the other direction.
35:40 Speaker 03 You just have to think, do you hold your map upside down or what? You just have to consider what you're doing and that's what we're doing now.
35:47 Speaker 02 As you're waiting for the governance board to decide what happens, imagine you've thought through and mapped out how you might go execute if you did have the mandate to do so. How do you think about that deploying large sums of capital into private markets?
36:03 Speaker 03 Really good question. First of all, when is a good time to enter this market? Hey, this market is in trouble. Private equity companies are not having a good time. Fundraising is difficult, exits are difficult, financing is not easy. You have a lot of debt coming up to renewals. This market is not great. And I don't think it's going to be great for some time. In my mind, good time to enter potentially. It's a bit like when we increased the equity share during the financial crisis. I think this could be one of those. How do you go about entering this market? You do a combination of primary and funds and you buy some secondary so that you get a good spread on managers and vintages. So that you don't take one big vintage risk or one big manager risk. But you spread it out and you build it up as a mosaic.
36:46 Speaker 03 It's pretty clear to me who are the good PE companies to be with. And it's interesting when you ask them all, who do you respect in the world? Who do you think are the best? It's the same names who come up all the time. It's fascinating.
36:57 Speaker 02 So in the EM world of your external managers, you mentioned being with smaller managers. As you've asked those questions about private equity, where does that break down in terms of size?
37:05 Speaker 03 Well, I should be a bit careful here.
37:09 Speaker 03 There were some really good large bonds and clearly some very good medium bonds.
37:14 Speaker 02 All right, we'll let that sit for now. As part of this idea of universal owner, there's a whole bunch of things that you could think about in terms of making the companies that you own better. You mentioned sustainability, your money comes from oil. Would love to hear your thoughts on the whole ESG world and how you've applied it to the pool.
37:31 Speaker 03 It's important for us to invest in a responsible way and that's what we do. We have, I think, the best ESG team in the world, probably. We have a framework of expectation documents. We have laid out in great detail how we expect companies to behave in terms of corruption, climate, water usage, the human rights and so on. So that impacts and guides the way we expect companies to behave. It also guides the way we vote at AGMs. And we do it through conversations that we have with our companies and we do it through the voting. We vote at 12,000 AGMs every year, 120,000 proposals. It's a big machine.
38:12 Speaker 03 We announce voting intentions five days ahead of time so that everybody in the world can see how we vote. And there are only basically two other big voting instructors. And we are in a way the third independent voice, really fascinating.
38:26 Speaker 02 How have you thought about environmental risk?
38:29 Speaker 03 The thing is that if you're a small company with 20 companies, you can hide, but we cannot hide. If we have one company which pollutes somewhere in the world, we pick it up in the rest of the portfolio. When you are a part of the whole world, you cannot hide. So you have to care about environment. The climate is a financial risk and when people politicize and say that climate is a political question, I just don't get it. To me, climate is as political as gravity.
38:54 Speaker 02 How do you integrate that with the stream of cash flows? That come to the fund just from oil, which is one of the fossil fuel pollutants.
39:06 Speaker 03 Well, it's oil and gas, okay? And gas is still a very important part of the energy solution in Europe for the next many years. I don't think it's unethical to exploit your oil and gas resources, not at all. It's a very important part of what makes the world tick. But we have to think long term how we deploy that capital and that's what we do.
39:25 Speaker 02 You mentioned wanting your team to think even longer term than they had before. How do you instill long-termism into the investment process?
39:34 Speaker 03 It's not easy because we are short term in our thinking. Imagine, Ted, you come home and tell your partner or your partner asks you, hey, what did you do today? Nothing. Day after, nothing. Day after, nothing. Day after, nothing. It doesn't feel good, but in investing, the best thing you can do sometimes is not to do anything. So one thing which I think is interesting is inertia analysis, right? You take your January one portfolio, see how it goes if you didn't change a thing. What would have been the results? And then you look at what you actually achieved and the difference in what you have subtracted or added by going to the office every day. And you'd be surprised how often you have subtracted value by going to the office. You should have been staying on the beach. And that's a pretty humbling exercise to go through. It's tough not to do anything.
40:18 Speaker 03 I remember in my previous life, I had an investor who had a really good year. And I said, do you trade a lot? They hadn't done a single thing and they hadn't changed a single position. And they had a phenomenal year. So it's possible.
40:30 Speaker 02 How do you create incentive schemes on your team to try to elicit that behavior?
40:36 Speaker 03 We do have a rolling three year way of looking at results. Is it the perfect way? No, it's probably not. And probably the incentive structure could be even more long term. It's funny this thing with long term, because when you are young, you're in a hurry. When you are 25, one year, wow, it's such a long time. Now, when you are on my age, one year is very short, right? The closer you get to death, the more long term you become. And that's just really intriguing. I met a guy, a Spanish guy the other day. He was like 85 and he was just planting some pistachio trees. I don't know how long time it takes for a pistachio tree to start to bear fruit, but quite a bit of time, right? He was really excited about his long term prospects for his pistachio trees. 85, hey, that's cool.
41:19 Speaker 02 So there's an element of long term investing comparable to where you started your career. And obviously, when you have these assets that you just think of buy and hold. At the same time, you've mentioned there are instances, like you're thinking about private equity now, where being contrarian really can make a difference and move the needle. People are notoriously not good at market timing. So how have you developed frameworks for deciding when is the time to move off the tried and true path? Maybe to take more risk or in this case, try to, if the opportunity presents itself, invest in something where everybody else is running the other way?
41:54 Speaker 03 It's a super good question. What I do is I just try to gauge greed and fear. And fear, it's relatively easy to gauge. You have the VIX index, I measuring the implied volatility. But you can see it like under COVID, you saw it in the amount of news that was about COVID. You could read about the worst case scenarios. You could read to which extent the specialists disagreed on the outcomes. Because when specialists disagree, that's really scary. So you could see that people were incredibly afraid. We fared for our lives. That kind of fear you can measure. You can measure during the financial crisis, when you have a CEO and you ask him and say, so how can this possibly now turn to the better? Nikolai, there is no way this can ever get right.
42:39 Speaker 03 We are doomed. There is no hope. Hey, of course, there is some hope. So you just need to speak to people, you need to gauge that fear, and that's what I tend to do. And then on the other side, euphoria, much more difficult to gauge, much more difficult. But you have to just get a feel for how much champagne is flowing, how loose are credit standards, how complacent are investors, and you just have to put it into some kind of framework. That's in a way how I look at it.
43:04 Speaker 02 There's a lot of this human input and judgment that you think about that goes into these things. You mentioned in passing data science and AI and your use of it in the process. And I'm really curious how you've thought about bringing AI into this process that is predominantly a universal owner of assets.
43:23 Speaker 03 So we don't really use it to pick investments. We use it to time the deployment of capital. When we get money into the fund, we use it for that timing. And we use it also now increasingly to minimize trading. Since we are an index near fund, we can buy a Tesla on a Monday and sell it on a Friday because of index changes. And by using this type of AI models, we can reduce the amount of training and save a lot of money. That's where we deploy it for the moment mainly.
43:51 Speaker 02 Since you've come into the seat, you've probably been more public than any time in your career. And you talked about the importance of transparency. I'd love to hear how you've thought about being transparent in a different way from how the fund might have run previously.
44:09 Speaker 03 Yeah, very important. It was a relatively secretive fund in the past. And when I came in, I thought it was time to open it up. And we have opened it up internally and externally. Internally, we have a lot more internal communication going on, and internal communication is key to performance. What we see is that the organizations which perform really well, those are organizations where information travels to the people who need to know. And everybody should know as much as they can. So now internally, for instance, we publish the notes from our leader group meetings. We transcribe them, summarize them through chat G P T, put them out on the intranet. Everybody can read what we discuss in the leader group. It's the most read thing we publish internally. That's one thing. Externally, we have opened up. Are showcasing more people in the past were four people who could talk on behalf of the fund.
44:54 Speaker 03 Now six hundred and fifty people can talk on behalf of the fund. We are more in media. We communicate more with the stakeholders because we see that the more knowledge you have about the fund, the more you trust the fund and trust is completely key for a fund like this. And we were selected the most transparent fund in the world by this transparency company in Toronto called SAM. This year for the first time and we're really, really proud. It's not so easy to be transparent, so we work really hard on it. But I think it's completely key and also the podcast we mentioned in good company is also part of this transparency. And the LinkedIn is follow me on LinkedIn as well. We publish a lot of things there. What we see is also that this drives applications for our jobs. We have in many cases, ten times as many applications as we had in the past.
45:38 Speaker 03 Over the last twelve months, the level of applications have doubled. So we get better applicants and we are relatively small company. We need the best and brightest. And so if you're a brainy person, you have to apply to us. Super happy I get all this advertising in here. Thank you a lot. I probably need to buy a beer or something afterwards.
45:54 Speaker 02 What are some of the other benefits you've found from being open and transparent?
45:58 Speaker 03 I think when you are, it makes it easier to align the organization towards the same goal. When you all publicly go the same way. I think it forces you to be even more honest with yourself, not to change your mind, not to have a mission drift. These kind of things, I think openness is only positive and we are as open as we can. And we even publish all our holdings once a year. And I think probably we can do it twice a year. I don't think we can do it more often than because then you can start to gauge how we trade. And so that's not great, but apart from that, we can do it. We publish what we talk to companies about in our company meetings. Check out our website. It's incredible.
46:34 Speaker 02 When you're deploying so much capital into markets, I'm really curious what the impact of your activities ends up being on just this much smaller asset management industry in Norway.
46:47 Speaker 03 My hope is that we can be a force for good in the Norwegian asset management industry and that we can have some positive repercussions for other companies. We have an investment conference coming up in April, which I think will be the best investment conference we've ever seen in that country. We are attracting the best asset managers in the world to come and talk to us and we'll stream it so everybody can listen in, 23rd of April. But we also have a very big summer program. We're taking more people than we need in our summer program. We have a big graduate program. So we try to over educate a bit and we have a teaching program where we teach at various universities, different type of courses, and we put our experts out there. We try to do something good there for the asset management industry generally. And it can be big. In Dublin, I think there was something like a hundred thousand people working in that industry.
47:32 Speaker 03 There are less people in Oslo. There are also, of course, different tax rules which make it a bit more challenging to start up and so on. But I think over time, Oslo could be a pretty cool centre for this because we've got different priorities than what we had in the past. I think our priorities changed during Covid. It was easier to work remotely and we appreciate nature more than we did.
47:51 Speaker 02 In your couple of years in the seat, I'm curious how much all of the activities you have found find their way into the stories of the beneficiaries that you serve.
48:03 Speaker 03 When you think about the fact that we contribute one out of five kroner into the budget, implicitly you do a lot of education budget, national health budget, all these kind of things. I do try to talk about that to the fund, that wow, we certainly have an important role in the country. I think it's one of the reasons why we get so many applications these days. People want to have a deeper sense of purpose in their lives and this is a very clear purpose.
48:28 Speaker 02 Where do you want this to go over the next five, 10 years?
48:32 Speaker 03 That's very clear. We want to be the best large investment company in the world.
48:36 Speaker 02 How would you measure that?
48:37 Speaker 03 Performance is one, reputation is one, long-term thinking, integrity.
48:42 Speaker 03 Ethics, ESG, it's a combination of things. It's also people. Do people have a good time? Do they thrive? Do they get to use their full self? Are they in the flow? A whole range of things.
48:54 Speaker 02 I'd love to ask you, maybe particularly from your podcast and Good Company, what are some of the biggest lessons you've learned from your guests?
49:02 Speaker 03 There are many ways to be a successful CEO. But the first thing that strikes me is that they work a lot, right? You just don't become a CEO by chilling all the time. You are in there. And I asked Jensen Huang of Nvidia, how much do you work? And he said, Nikolai, there is hard work and then there is insanely hard work. So I said, where are you? I work insanely hard. I work from five in the morning until I go to bed. I work every day. I work every Saturday, Sunday, holiday and wow. So then I said, so yeah, but when do you relax? Yeah, Nikolai, I relax all the time. And that's because he's got passion. And passion is the second thing. So it's hard work and then passion. These people are passionate. They love what they do and that's why they work so hard. The third thing is grit. Why do you have grit? Do you have more grit if you are passionate about what you do? You can take more shit.
49:45 Speaker 03 You can take more backlashes and more resistance if you really love what you do. And then they run towards problems. They take the problems. That's also really important.
49:55 Speaker 02 What's been your most memorable experience doing the podcast where you came off and said, wow, that's really why I wanted to do this?
50:02 Speaker 03 I get that a lot of times. It's a bit like when you meet a person and you have a meaningful conversation and you just get deep into something, that's just really fascinating. What an honor to be able to have a whole hour with some of these people, to spend an hour with Bill Gates or Jensen Huang or Sam Altman or James Gorman or you name it, that you get a whole hour with some of the most important people in the world who shape the world into what it is. And some of them help you look into the future as well. It's really fascinating. I love it. And lifelong learning is another thing that they all mention. And this is part of my lifelong learning too. I read up on these podcasts during the weekends, probably the same way as you do. All of them feel a bit like an exam. You don't want to disappoint the people who listen in. You don't want to screw it up.
50:46 Speaker 03 You don't want to come across as a fool, which will be the person you interview. So it's just a really cool thing. And we have got hundreds of thousands of people who've been listening to these things. And hopefully some people can learn some as well.
50:58 Speaker 02 How do you go about preparing to interview such a wide range of executives?
51:02 Speaker 03 I get great support from the organization. So we have a sector analysts who cover the various sectors. I've got a guy called Sigur who is helping me prepare as well, who's collating a lot of this information, doing a tremendous job. Then I have a lot of good friends in a lot of different fields and who are very clever. And I typically ask them, hey, any help here? Any good questions I should ask them? And to get this thing from different type of angles is really helpful. And then I spend time myself doing it and putting on my own thoughts. And hey, that's, that's the way we do it.
51:31 Speaker 02 Nikolai, before I let you go and ask you a couple of closing questions, what is your favorite hobby or activity outside of work and family?
51:37 Speaker 03 I would say is nature. And I walk a lot in nature. It's good for psyche. I pick mushrooms in the autumn. I ski in the winter. I sail in the summer. Nature is where I relax.
51:48 Speaker 02 What's one fact that most people don't know about you?
51:52 Speaker 03 I do collect art and I started 25 years ago when I did that break. So I built now what is the artist's collection in the world of Nordic modernist art. I've given it to my hometown in Norway where I grew up and they will open a museum in May, which I think will be pretty spectacular. So just buy your tickets.
52:11 Speaker 02 Another advertisement. What's your biggest pet peeve?
52:15 Speaker 03 Unnecessary red tape and bureaucracy. I like speed. I do think speed is a mindset.
52:20 Speaker 02 How have you fostered speed in a larger organization that's so important in every move you make?
52:27 Speaker 03 Super question. Speed is not necessarily a mindset in the public sector. Okay, there are different priorities. You need to be very accountable. Everything you do, it needs to be traceable and you need to prove that the necessary work has gone in there. And so it is a challenge, but there's also a lot of learning, right? Because when you really anchor something solidly, it makes the change easier to make. Because the stakeholders have been part of planning the change and so it's easier to conduct it. And so you can operate within a bigger system, but it just takes a different way of working. That's been a great learning for me.
53:01 Speaker 02 Which two people have had the biggest impact on your professional life?
53:05 Speaker 03 I would say there's been more than two. I mentioned the one at Casanova, David Croft. I would say the two people at Edgerton, John and Bill, really important. And then my colleagues at AKO were important in forming me. And then I love working with my new colleagues in the fund.
53:18 Speaker 02 What's been the happiest moment of your professional life so far?
53:22 Speaker 03 Probably when we got the first really incredible client at AKO. When you set up a fund and then you have a world leading investor giving you money and trusting you with the money. And you know that you have passed the most difficult exam there is in terms of building a firm. And they have done DD, left, right and centre for months. And they have checked everything. And they have therefore implicitly okayed you, the team, the organisation and the process. That is a big moment.
53:57 Speaker 02 What's the best advice you've ever received?
53:59 Speaker 03 To always go for the most difficult choice, to just always run towards the problems. I have always tried to take the most difficult way.
54:06 Speaker 02 All right, Nikolai, last one. What life lesson have you learned that you wish you knew a lot earlier in life?
54:12 Speaker 03 You're not in a hurry. You've got a lot of time. Think long term.
54:15 Speaker 02 Nikolai, thanks so much for sharing your path and the seat on top of a very large pool of assets.
54:22 Speaker 03 Thank you, Ted.
54:24 Ted Seides? Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com where you can join our mailing list, access past shows, learn about our gatherings and sign up for premium content, including podcast transcripts, my investment portfolio and a lot more. Have a good one and see you next time.
Previous CIO Greatest Hits: Single Family Offices – Steve Rattner (Willett Advisors) Next CIO Greatest Hits: Public Pensions – Ash Williams (Florida SBA) Page updated November 1, 2026 · transcript and summary are machine-generated
