Norges Bank has amended rules for how the new CEO at the world's largest sovereign wealth fund may invest his personal wealth, as the country's banks cannot handle the sum.
To eliminate potential conflicts of interest when Nicolai Tangen took on the role of CEO at Norges Bank Investment Management — which runs the assets of the 10.6 trillion Norwegian kroner ($1.16 trillion) Government Pension Fund Global, it was agreed that his investments in funds would be wound up and the proceeds invested in bank accounts. His personal wealth is managed by Gabler Investments.
However, the central bank said in a letter to the Ministry of Finance, dated Oct. 1, that the value of redeemed fund investments was close to 5 billion kroner. Mr. Tangen's cash deposits in foreign banks are an additional about 2.9 billion a year, amounting to total bank deposits of almost 8 billion kroner.
Norges Bank said there is a limited number of banks with a sufficient rating and solvency where personal bank deposits of this size can be made, while anti-money laundering and other rules related to large deposits are time-consuming. "Overall, it has therefore proved difficult to diversify investments sufficiently to avoid significant exposure to individual banks," the letter said.
The central bank has instead outlined plans to allow Mr. Tangen to invest in Norwegian and foreign government securities with maturities of up to 12 months and to invest in other securities issued by public authorities, including international institutions, with maturities of up to 12 months. These investments are in addition to bank deposits and may be invested directly or via funds. Investments may not be made in equities or corporate bonds.
"The purpose of investments in such securities is to spread the funds and prevent unwanted exposure to individual banks, not to achieve higher returns. At the same time, these are deep and liquid markets where individual investors cannot influence market prices," the letter said. Limiting the maturity of the assets prevents an overlap with GPFG's benchmark index, since the wealth fund's government bond investments have a "significantly longer maturity."
Gabler will manage the funds from the sale of Mr. Tangen's stake in AKO Capital, the London-based hedge fund he founded. Assets will be run through a discretionary management arrangement, with Mr. Tangen having no influence on individual investments. Gabler cannot invest assets with money managers that have been hired by NBIM and cannot be invested in fixed-income securities that are excluded from GPFG's investment universe.
Further, Mr. Tangen's assets cannot be deposited with NBIM's custodian, Citibank — a restriction that applies to all NBIM employees, the letter said. There is also a 400 million kroner limit on deposits with a single bank, although Norges Bank's executive board "may grant exemptions from this limit for Tangen's custodian bank."
Changes are to be implemented as soon as possible.