Hello everyone. Today we welcome Nicolai Tangen, the chief executive of Norges Bank Investment Management, the organization that oversees Norway's government pension fund global, the world's largest sovereign wealth fund with more than $1.9 trillion dollars invested across global markets. Its decisions shape corporate behavior worldwide and under Mr. Tangen's leadership has become known for greater transparency, active ownership, and a clear long-term investment philosophy. Before leading the fund, Mr. Tangen founded and ran AKO Capital, which was one of Europe's most respected hedge funds, following earlier roles at Citigroup and Goldman Sachs. He studied finance at the Norwegian School of Economics and Wharton, later adding degrees in art history at the Courtauld and social psychology at the LSE and Russian at the intelligence services in Norway, a combination that reflects his broad interests. Please join me in welcoming a financier, a philanthropist, and one of the most influential voices in global investment today, Nicolai Tangen.
Welcome. So, let's begin with your early career. Mr. Tangen, your early path is anything but typical for a future leader of the world's largest sovereign wealth fund. You trained in Russian and translation with the Norwegian intelligence services. You studied finance at the Norwegian School of Economics and Wharton and you also studied art history and social psychology. With such a diverse background, can you take us back to the beginning and explain how you first found your way into finance and more importantly what it is about investing that's continued to motivate you throughout your career?
Yeah. Well, so why do you go into finance? Typically because you want to make money. And so I grew up in a small town in Norway. And I was just keen to make money. I thought it was great fun. Started early on to get a part-time job in a stock broking part of a bank. And then my dream was just always to work in London, you know. And so then I studied finance, went to the US and started to work in London. So that was the beginning. Now why do you want to work in finance? Why do you want to do asset management? Because it is the most interesting thing you can do. If you think about investing, you have to think about who produces what you wear, eat, drive and consume. You have to think about new introductions, technology, what's going on from the product side of things. You have to look at management. You have to look at psychology of organizations. You have to look at geopolitics, defense, currencies, macro environments. Just absolutely everything that goes on is part of this thing. You could not invent a more exciting game if you tried and if you're good at it, you make money. And sometimes you make money even if you're pretty bad at it.
Yeah. Good. So you make money. So after establishing yourself in the world of finance, you know, with roles such as at Citigroup and Goldman Sachs, you made the leap from a secure corporate career into launching your own firm with AKO Capital. So what motivated you to take that entrepreneurial jump and what were the biggest challenges you faced in building a fund from the ground up?
Yeah. Well, I had worked in a firm called Edition Capital, which was one of the first hedge funds. I had learned a lot. They had trained me. Worked with an extremely talented group of people set up by John Armitage and Bill Browder. And then I took a break. I studied art history, but realized quickly I was better at looking at stock paintings. And so that's when I stopped studying art history and decided to set up my own company. Now, what's the big challenge when you set up your own company? Is anybody going to give you any money? Because it's not easy to set up a company because you need to convince people to part with the money so that you can run it. And of course, that means that they have to have trust in you and so on. And so that's the big challenge. It's not easy to set up a company and it's even more difficult today than it was then.
But a lot of our students here at Oxford would presumably, you know, be going on to set up their own companies in the next couple of years. So, what is one advice you have for them that you remember that you wish someone had given you when you were at that early stage in your career at that time when you were setting up the company from the ground up?
Well, I think I got all the advice I could ask for. But the important thing is that asset management is an apprenticeship business. You need to learn it from somebody. You can't just go from school and set up an asset management company because why would people give you money? You haven't been trained by anybody. You haven't got a track record. You don't know what you do. So you have to work with somebody first who gives you some credibility. I think that's very important. And you know just don't set up too early. Learn as much as you can. Very many of the successful entrepreneurs are in the late 30s when they set up. I mean, I was 37, 36. David Rubenstein, he was the same age when he set up Carlyle. Reed Hastings was in I think in the 40s when he started Netflix. You are not in a hurry, you know, you have a lot of time. Why is it that when you are 20 you are in such a hurry when you after all have your whole life in front of you but when you're 50 you got so much time and yeah no problem it's really very interesting and I think it's because when you're 20 one year is 5% of your life and when you're 50 one year is 2% of your life so you just change your way of thinking about time.
Right. You then made obviously another major transition which was leaving AKO to take on the role of CEO at the Norwegian Sovereign Wealth Fund. The move required you to sell your stake in the firm that you built, which is not a small step for any founder of the firm. So, can you talk us through that, like what it meant to let go of AKO and how your entire perspective had to evolve from going from running a hedge fund to running a sovereign wealth fund?
Well, I did actually I passed it on for free to a charitable foundation. Yeah, so I had then run this hedge fund for 15 years. My learning was kind of plateauing and I thought it was time also to pass on the firm to the next generation. So I had started that planning I actually started to apply for universities again because I think the best place to be is to be at the university. So you are very lucky and you look forward to leaving this place. You don't know what a wonderful life you have just now and how much tougher and less good it's going to be when you're out of here. But whatever I had started to apply for university and then this job came up and for me it combined three of the things that I really believe in. One is asset management. We talked about why that's so interesting. Then the potential of helping to continue to develop an organization and I had just studied organizational development and then doing something good for the country. So it all came together in this job.
Right. So let's talk more about your job at the Norwegian Sovereign Wealth Fund. In the late 1990s, Norway made a deliberate attempt that set it apart from many of the other resource-rich nations where they channeled the money into what is now the government pension fund global to protect the country from volatility and to prepare for a post-oil future. From your perspective, how critical has that structure been in anchoring Norway's economic stability over the past two decades? And how do you see the fund's role in shaping the country's long-term economic resilience and strategic direction? I mean, I know the fund does not invest within Norway, but how important has it been in anchoring the economy and achieving stability?
Well, when they found the oil in '69, they decided to set up a fund after they found the oil in '69. And I would say the politicians did really really well in Norway. They first of all decided to save for a rainy day. In many other places they had not set up a fund and it had led to kind of corruption and crowding out and these kind of things. It's been instrumental in helping build the welfare state. Now there is a spending rule which means that the politicians can spend 3% of the fund every year and that now accounts for more than 20% of the state budget. So it's been very important for the country. Now there have been a couple of things which have been very important here. One is the broad political anchoring. So when you change government, you don't really change the investment philosophy. There is a very good and strong mandate from the ministry of finance which describes how we should be invested and that's very important. The spending rule I mentioned that's important and then the transparency is important. You know we are the most transparent fund in the world and that's important in the Scandinavian context.
So talk us more, take us through your investment philosophy. You said there's a clear mandate from the ministry of finance. Could you talk more about that and then talk us through how you approach investment? Suppose there's a company which comes towards you and you know you have to evaluate whether to invest in them or not. What is the guiding philosophy? What is the thinking behind it? How do you walk us through that stuff please?
Yeah. So we are an index near fund right. So we are investing close to the index and the mandate that we have gotten from the ministry of finance. We have... you just explain for the viewers what exactly does that mean? Well so the mandate in broad terms means that we are roughly 70% equities 30% bonds within the bonds we also have some real estate and some renewable infrastructure investments. But you will classify also country splits and so on so that's very helpful and I think it's important because when a fund is so important in a country there must be limits for how much money management can lose. And so you have in a way to tie yourself a bit to the mast and that's what we do also because when you go through periods of big swings in markets we have predefined rebalancing rules which means that when markets go down a lot we would sell some bonds and we buy shares and it's important to have that a bit on autopilot and so that's what we do.
But talk us through now your investment philosophy as CEO. Talk us through a decision. How do you walk through it? What are some industries you look at? Some sectors you look at how do you evaluate where to invest? Okay. And how does that...
So I don't personally make investments. Because it's a difficult job and it needs to be you need to have people who do this on a full-time basis. So we have split the money into mandates. We have a large proportion which is index near and where we have different overlay strategies and then we also have sector teams. So we'd have one sector team covering pharmaceuticals, industrials, you know, hardware, software and so on. And so that's how they do it and then they go about their business trying to outperform their reference index.
What are some of the sectors currently which are I mean obviously AI is one we discussed before as well and we'll get into that in a bit but what are some sectors which are currently booming or some countries, some areas of the world, geographical regions, sectors which the fund is particularly interested in.
Yeah. Well, now the financial sector has done very well. The banks it's partly because of the way the interest rate curve is looking but it's also renewed activity when it comes to deals and M&A activity and so on. So that's been good. Of course we've had periods where the AI sector has been very strong and technology has been very strong but these things you know they go in waves.
Right. You know the fund is often recognized for its climate engagement. You know supported a lot of emissions commitments and urging energy companies to accelerate their transition plans but it also faces a criticism that it calls for decarbonization can appear hypocritical given the fund itself has built itself on oil and gas revenues. So how do you view that tension and to what extent can a fund which is financed by petroleum wealth still credibly push for decarbonization while navigating Norway's broader role as an energy producer and a climate conscious nation.
Hm. Well, so in my mind there is no contradiction here because it's not unethical or wrong to develop your natural resources and so we have done that and then the decision is how do you invest that money. Now we are given that we invest across the world and we own one and a half percent of all the companies in the world. It's important for us to think about climate and to think about pollution because if one company in a portfolio pollutes, it's being picked up by all the other companies. And so therefore, we really need to think about this in a different way. And the second reason why we need to think about it is because we have a very long-term horizon when it comes to how we invest and climate risk clearly is a financial risk. And we see it now through higher raw material prices for everything from coffee, cocoa, we see it impacting beef prices, you know is an underlying inflationary force which is everything else being equal problematic for financial markets. There was also an underlying inequality exacerbating force right because developing countries which still have to develop, a lot of them are the ones which are most prone to the effects of climate change.
So how is the fund doing anything about that? Is there any activism in that sector or not?
So I wouldn't say we are activist but we are constructively having dialogues with companies. We have expectations for what we think they should be doing on the climate side. We advocate that companies should have net zero plans and we follow that up through our conversations.
Now, early this year, you know, the fund's vote against Elon Musk's compensation package at Tesla attracted a lot of attention, especially because, you know, you've spoken with him in the podcast as well. And you've said in the past that corporate greed has reached an extreme level and such packages are very very costly for shareholders ultimately. So what is it exactly about these increasingly outsized compensation structures that you find most problematic and to what extent do you believe that large long-term investors like Norges have a responsibility to push back on that trend?
The important thing for us is that management compensation is aligned with our interests. So they should be tied to results. They should be equity based and they should vest over a long period and of course you also have to look at various dilution effects. So as long as they are really aligned with our interest and they are fair we are okay with them.
Right. I want to talk about one other thing. You know obviously the finance ministry has a mandate for the sovereign wealth fund but for most parts we're independent but you know in the wake of recently we saw the atrocities committed by the Israeli government the Norges Bank Investment Fund announced the exclusion of six Israeli companies over activities which were linked to the West Bank and Gaza. So a fund of your scale and your global visibility, decisions like this inevitably attract a lot of interest, a lot of attention, not only because of the conflict, but because they sit at the intersection of ethics, risk, and financial stewardship. So walk us through how Norges approaches these sort of investments and these exclusions when a lot of the times when these companies are involved in war or involved in things which atrocities are committed by the government.
Yeah. So the structure in Norway is that it's the parliament, well it's the Norwegian people who owns the fund. The parliament looks after it. On a day-to-day basis it's being done by the ministry of finance. They delegate to the central bank and then we do it within the central bank. In addition to that, there is a separate so-called council of ethics and they would make decisions when it comes to what are ethical considerations that we need to have in order to decide where we invest. So for instance, we don't invest in coal. There have been various weapon criteria. So that's an independent council. Now earlier this year it was decided that we should have a relook at that or the politicians should have a relook. There is now a committee which is going through that whole way of doing things and they will decide within a year or two just how one is going to take that process forward.
Right. But do you as a CEO believe that sovereign wealth funds have a responsibility to take principal positions in situations where human rights concerns and financial considerations collide?
Well, we have clear expectations when it comes to human rights breaches around the world. We have excluded many companies because of human rights considerations. I think that's totally key. You will not have legitimacy in a country, you know a fund will not have legitimacy if you break human rights rules you just cannot do that and so that's very important.
But those are like the extreme situations we're talking about right? What my question refers to is the borderline situations where you have firms for example engaging in sweatshops in Bangladesh where they do the manufacturing etc so how much do you, you said there's an ethical board, it's fine. That's considering it. But you as a CEO, what do you think? What is the balance between just investing where you get the best return and make the most money or you have some ethical considerations you keep there?
Absolutely. So, of course, sometimes these concerns, these goals come up against each other. Our goal is very clear. We are here to make money with acceptable amounts of risk in an ethical manner. It's been very useful to have an independent council of ethics which takes care of the ethical exclusions which means that it makes it easier to run the fund with one goal in mind.
Yeah. So it outsources the ethical considerations.
