The Cool Hand Steering Norway's Billions

The man who manages what may be the world's biggest sovereign wealth fund looks relaxed as he holds court in shirtsleeves and tie in his sunlit corner office on the fifth floor of the Norwegian central bank. And why not? It's Friday afternoon; spring is finally arriving in Oslo. More important, after taking a 23 percent loss in 2008 and plenty of political heat during the financial crisis, Norway's oil fund, which Yngve Slyngstad runs, is recovering, with a 26 percent surge in 2009 and a 10 percent jump in 2010. The fund's dramatic shift to 60 percent equities from 40 percent in the midst of the meltdown, a controversial move at first, helped power the gains. Now, he says, political backing for taking that risk "is even stronger today in 2011 than it was before the financial crisis."

Norway's fund, officially known as the Government Pension Fund Global, holds $570 billion—double the size of Pimco Total Return, the world's largest mutual fund. That's more than $100,000 for each of Norway's 4.9 million people, and it's growing rapidly, adding $82 billion from state contributions and investment gains last year.

The Abu Dhabi Investment Authority is often named as the world's largest sovereign wealth fund. Yet like the funds of other Gulf emirates such as Qatar and Kuwait, it doesn't disclose its size or performance. Rachel Ziemba, who follows sovereign wealth funds at Roubini Global Economics in London, says "the Norway fund may be a little bit larger than Abu Dhabi's," which she pegs at about $500 billion.

With the assets of Norway's fund equal to almost 2 percent of the total market value of all stocks trading in Europe, Slyngstad is one of the world's most important investors. The fund doesn't disclose daily trades, but it publishes its full holdings at the end of each year. In the latest compilation, Royal Dutch Shell (RDS.A) was its largest stockholding, with a value of about $4.1 billion. BP (BP) was fourth. ExxonMobil (XOM) and Apple (AAPL) were the only U.S. companies in the top 10. The fund is barred from owning more than 10 percent of any company.

Founded in 1990, the fund is meant to conserve money for future generations of Norwegians and to prevent petrodollars from overheating the Norwegian economy. It receives all of the Norwegian state's oil revenues—minus a portion, usually about 4 percent of the fund's value, that goes to the state budget. Last year, $34 billion flowed into the fund.

Slyngstad, 48, joined in 1998 from insurer Storebrand with a mandate to add equities to the then-all-bond fund. He's figured heavily in a long push to persuade a succession of finance ministers, who have final say over the fund, to accept greater risks in pursuit of higher returns. After getting the nod to increase equities to 60 percent, Slyngstad, who became chief executive officer in 2008, led a $175 billion stock-buying binge in the depths of the financial crisis. There were mistakes, including holding 1.6 percent of Lehman Brothers' shares when the company went bankrupt. Overall, sticking to the strategy has paid off. "They have done better than most sovereign wealth funds in the crisis," says Elroy Dimson, a professor emeritus at London Business School who advises the Finance Ministry on investment strategy.

Slyngstad wants to put money into Mexico and Colombia, adding to an emerging-markets stake that includes investments in China, India, and Brazil. He won permission to put 5 percent of the fund's assets into real estate, reducing bonds to 35 percent. He did his first real estate deal last year, buying 25 percent of London's prestigious Regent Street shopping district from the Crown Estate, which manages property for the royal family, for $746 million. While he's also targeting French and German real estate, he's not in a hurry, he says: "There will be better buying opportunities after 2013."

In the coming years, Slyngstad, who was paid $790,000 in 2010, will be looking for other ways to be "more of an owner and less of a lender." He has promised Parliament to deliver returns of 4 percent after inflation—better than the 3.1 percent achieved since 1998. "If you say something to Parliament," he says, "you are accountable."

The bottom line: Aiming to boost average returns to 4 percent annually after inflation, Slyngstad invested $175 billion in stocks during the financial crisis.

Before it's here, it's on the Bloomberg Terminal.