Inside Norway's Sovereign Wealth Fund

Media coverage of sovereign wealth funds often focuses on their controversial investments in troubled American and European banks. Many investment professionals have a different question on their minds: What are the career opportunities?

At Norges Bank Investment Management (NBIM), the marquee opportunity consists of jumping from an analyst's role in a buy-side or sell-side firm, to that of full-fledged portfolio manager. "Pretty much each of them runs their own little hedge fund," says Paul Marcussen, senior portfolio manager in NBIM's New York office, of the investment professionals who work there.

An arm of Norway's central bank, NBIM manages the country's Government Pension Fund and foreign exchange reserves. Swelled by oil revenues - Norway is among the world's top 10 oil producers and the third-largest net oil exporter after Saudi Arabia and Russia - its assets totaled about $400 billion as of March 31.

Getting in the Door

New front-office hires generally require three to four years of solid experience as a buy-side or sell-side analyst, including deep knowledge of between 50 and 100 companies within their sector, says Mark Wingate, who heads NBIM's global equity team. Wingate, who is American, is based at Norges Bank headquarters in Oslo but was interviewed by eFinancialCareers News while visiting New York.

NBIM also sometimes hires experienced portfolio managers from big asset management firms, who've grown tired of budgeting, marketing and administrative responsibilities. "This organization lets people be the purest investors they can be, anywhere," says Marcussen, a Norwegian who has lived in New York since 1990. "We have no client meetings, no bureaucracy."

Rapid asset growth combined with a legal mandate to invest all the assets outside of Norway has made NBIM a significant shareholder in thousands of large-cap companies the world over. That gives its portfolio managers a high degree of access to corporate executives.

Staffing Needs

Beyond Oslo and New York, NBIM also has staff in London and (since last autumn) Shanghai. The New York office employs 24 people, 20 of whom are portfolio managers or traders. Just a handful are Norwegian expatriates. The office has grown from "16 or 17" people a year ago and is expected to add about 10 more in each of the next two years, Marcussen says.

The near-term priority is adding global sector long-short equity managers. "We definitely need to have more presence" in New York, says Wingate. North America made up more than 30 percent of the fund's holdings last quarter. However, the New York team's purview is global: Its portfolios aren't limited to North American markets or companies.

While turnover is low, Marcussen notes the chance to build an initial track record as a portfolio manager can be a stepping stone to the hedge fund world.

Compensation

An external recruiter we spoke with agreed. Jay Gaines, chief executive of Jay Gaines & Co., says he often recruits portfolio managers out of state or municipal-run funds and internally managed pension funds, which he calls "softer" environments whose candidates have a "price advantage." Although Gaines has yet to recruit from NBIM or other sovereign wealth funds, doing so "would just be an extension of that strategy," he says.

NBIM's bonus structure is closer to the formula-based hedge fund model than the investment bank model. "There's very little politics. You're delivering a return and you get a percentage of that," explains Marcussen. "We have said we will pay competitive, though not market-leading, salaries. The real value is the opening that the platform gives a PM to build his own PM franchise value by delivering strong returns."

He and Wingate cite several contrasts between working at NBIM and working for a private hedge fund. They include:

A High Degree of Autonomy: In a big asset management firm, analysts must sell their ideas to the portfolio manager or they won't be acted on. That places a premium on sales skills over stock-picking, observes Marcussen. At NBIM, professionals run their own long-short portfolios and are accountable for their results.

Less Short-Term Performance Pressure: NBIM allows newcomers up to three years to prove they have some skill. At private hedge funds, newcomers fear for their jobs after six to nine months of underperformance, contends Wingate.

Sticking to a Sector: All NBIM analysts and portfolio managers stay sector-specific. In other fund companies, a portfolio manager often has to deal with multiple sectors.