Volatile markets could last several years, and Norway's sovereign wealth fund could suffer low — if not negative — returns, Norges Bank Investment Management CEO Nicolai Tangen warned.
NBIM is the in-house manager of the Oslo-based Government Pension Fund Global, which has 14.44 trillion Norwegian kroner ($1.39 trillion) in assets.
The 2022 market turmoil resulted in the worst year for equities since the global financial crisis and the worst for bonds in history, wiping $30 trillion from the value of global financial markets, Mr. Tangen noted in a speech to Norway's Finance and Economic Affairs Committee on Tuesday.
"I think we need to be prepared for several years of volatile markets, with low and perhaps negative returns on the fund," he said.
Mr. Tangen also addressed the recent Silicon Valley Bank collapse, noting that investors should put more resources into finding companies that should be considered "rotten apples," in the speech published Tuesday.
"If we manage to find them early, there's money to be saved," he said.
Mr. Tangen also responded to the Ministry of Finance's question in a letter dated March 27 about whether GPFG should be permitted to invest in private markets beyond its existing investments in private real estate and private renewable energy infrastructure, at 2.7% and 0.1% of assets, respectively.
Mr. Tangen said NBIM should revisit its level of investments in private markets, which has been debated in the past.
The market for private equity has grown significantly in relation to the pubic market, he said. "In 2007, it was 3% of the size of the listed market. The figure today is 8%," he said, adding that as companies mature, value is created before they are listed and before public markets investors can access them.
Mr. Tangen said NBIM's recommendation on adding more private markets investments will be provided to the ministry in December.