9 ms·

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, j

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/sesong-3/episode-2 https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215/seson... @ 28:30

pveierland 10y ago
Anecdotally; I spoke to a person from "Norges Bank Investment Management" today at a careers fair about this issue, and apparently this example of using active external investors is something that they have been avoiding since, and that the magnitudes of their internal bonuses are far more restrictive.
- TuringNYC 10y ago
  This is a very good point. A very simple scenario would be that all the money is placed in super-thrifty ETFs with .05% fees. When you have figures as high as $882B, those outside management fees get large. In this case, it would be 441M!
cloudjacker 10y ago
It's because financial transparency doesn't have allot of competition, it's a low bar to say and do some transparent things Anyway, that manager needs to negotiate a better deal if they only get 60m annually with almost a trillion AUM
charlesdm 10y ago
$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. If the performance is there, they should get compensated well for that. Otherwise, why put up with the stress of managing billions of dollars?
- kristofferR 10y ago
  The asset manager in question, Mattias Westman, wasn't Norwegian. > there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. That seems extremely dubious. Do you have any sources?
  - vidarh 10y ago
    It's not controversial that there are funds with high returns over long periods. The problem is that there are also funds with high returns that suddenly nosedive, and new funds from people with high returns in the past that doesn't do well at all. In other words: it's easy to pick the lottery numbers with hindsight.
- necessity 10y ago
  ... and the inhabitants always lose
- finstell 10y ago
  > 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.
  - kristofferR 10y ago
    Yeah, the oil fund averages just 0.25% above index, and that's without the extra cost of being actively managed factored in (although its huge size probably makes it impossible for it to be passively managed).
    - 010a 10y ago
      Are you aware how much 0.25% of $800 billion dollars is? Now, go ahead and complain about a $60M compensation.
Havoc 10y ago
I'd venture that at that scale you don't really have much of an option except going active. Passive is essentially swimming with the stream, but what if you're big enough to affect the stream...you're kinda active in a way already right there.
- tim333 10y ago
  Yeah but I'd pick stocks for them for a thousandth of that.
  - Cyph0n 10y ago
    That's why you're not picking stocks for them ;)
    - alasdair_ 10y ago
      If he picked randomly, it's entirely possible that he could do a better job :)
      - rtpg 10y ago
        If this fund's actual purchases are available, this is a thing you can check. Would make for a good headline, too. "$60 Million for a coin flip!"
  - 010a 10y ago
    The difference between $60k and $60M, for a fund nearly a trillion dollars large, is worth it if that person worth $60M can eek out even a few extra basis points in returns. Despite what many people believe, there are those out there who have an eye for value, and _can_ pick stocks.
    - jellicle 10y ago
      > there are those out there who have an eye for value, and _can_ pick stocks. There's simply no evidence that is true at all. Every study of this issue says the exact opposite: there's no one out there who can pick stocks.
FullMtlAlcoholc 10y ago
If you're successfully managing nearly a trillion dollars, that's a bargain. There are CEO's who run billion dollar companies into the ground and receive more compensation than that!
- kristofferR 10y ago
  The manager who received $60MM was managing assets worth $325MM. The fund has also started to become active in pushing for lower executive pay... http://www.bbc.com/news/business-36185925 http://www.bbc.com/news/business-36185925
  - charlesdm 10y ago
    But how large returns was he generating? You seem to feel strongly against asset managers being compensated well.. but IF he was delivering great returns, I don't really see the problem? That said, $60MM per year for $325MM AuM does seem a lot.

pveierland 10y ago

Anecdotally; I spoke to a person from "Norges Bank Investment Management" today at a careers fair about this issue, and apparently this example of using active external investors is something that they have been avoiding since, and that the magnitudes of their internal bonuses are far more restrictive.

TuringNYC 10y ago
This is a very good point. A very simple scenario would be that all the money is placed in super-thrifty ETFs with .05% fees. When you have figures as high as $882B, those outside management fees get large. In this case, it would be 441M!

cloudjacker 10y ago

It's because financial transparency doesn't have allot of competition, it's a low bar to say and do some transparent things Anyway, that manager needs to negotiate a better deal if they only get 60m annually with almost a trillion AUM

charlesdm 10y ago

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. If the performance is there, they should get compensated well for that. Otherwise, why put up with the stress of managing billions of dollars?

kristofferR 10y ago
The asset manager in question, Mattias Westman, wasn't Norwegian. > there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years. That seems extremely dubious. Do you have any sources?
- vidarh 10y ago
  It's not controversial that there are funds with high returns over long periods. The problem is that there are also funds with high returns that suddenly nosedive, and new funds from people with high returns in the past that doesn't do well at all. In other words: it's easy to pick the lottery numbers with hindsight.
necessity 10y ago
... and the inhabitants always lose
finstell 10y ago
> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.
- kristofferR 10y ago
  Yeah, the oil fund averages just 0.25% above index, and that's without the extra cost of being actively managed factored in (although its huge size probably makes it impossible for it to be passively managed).
  - 010a 10y ago
    Are you aware how much 0.25% of $800 billion dollars is? Now, go ahead and complain about a $60M compensation.

Havoc 10y ago

I'd venture that at that scale you don't really have much of an option except going active. Passive is essentially swimming with the stream, but what if you're big enough to affect the stream...you're kinda active in a way already right there.

tim333 10y ago
Yeah but I'd pick stocks for them for a thousandth of that.
- Cyph0n 10y ago
  That's why you're not picking stocks for them ;)
  - alasdair_ 10y ago
    If he picked randomly, it's entirely possible that he could do a better job :)
    - rtpg 10y ago
      If this fund's actual purchases are available, this is a thing you can check. Would make for a good headline, too. "$60 Million for a coin flip!"
- 010a 10y ago
  The difference between $60k and $60M, for a fund nearly a trillion dollars large, is worth it if that person worth $60M can eek out even a few extra basis points in returns. Despite what many people believe, there are those out there who have an eye for value, and _can_ pick stocks.
  - jellicle 10y ago
    > there are those out there who have an eye for value, and _can_ pick stocks. There's simply no evidence that is true at all. Every study of this issue says the exact opposite: there's no one out there who can pick stocks.

FullMtlAlcoholc 10y ago

If you're successfully managing nearly a trillion dollars, that's a bargain. There are CEO's who run billion dollar companies into the ground and receive more compensation than that!

kristofferR 10y ago
The manager who received $60MM was managing assets worth $325MM. The fund has also started to become active in pushing for lower executive pay... http://www.bbc.com/news/business-36185925 http://www.bbc.com/news/business-36185925
- charlesdm 10y ago
  But how large returns was he generating? You seem to feel strongly against asset managers being compensated well.. but IF he was delivering great returns, I don't really see the problem? That said, $60MM per year for $325MM AuM does seem a lot.