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00:00Given the size of investment you manage. How do you move the needle for 2023? Well, first of all, we are relatively index, they are fun. So, of course, that's that's the main thing we invest according to an index given to us by the ministry. But we also tried to tweak out some Axis performance and and that's what we what we did last year. We had more than 100 billion range in kroner and access returns. And that's why we work hard to do on sector basis. How do you move? Given how tight your R squared is to a given index that you look at, what micro decisions can you make to recover and maybe go in excess of an index return? Well, what we did last year was that we we were overweight, the integrated energy companies, which did well, and we also were underweight recent IPOs because the market seemed really frothy and in 21. And so we are underway to add those. And a lot of those did really badly last year. So that saved us some money as well. You talk about being defensive in 2023. What does that mean, Nikolai? Well, I think 2023 is much more difficult to call. You know, coming into 22, we had more of a careful stance is less of these extreme situations to look at now going into 23. So we are more equal weight generally. It's a very tough market to call. Is there a lot of pressure within Norway to shift the mandate away from being so closely tied to the index, so subject to the flows of the macro world to move into private assets, whether it's private equity or real estate, and expand that bucket that you already have? No, I think it's very, very important for our very large fund like these to actually to be quite index there, because the thing is that if you are too far away from the index and you make big mistakes, the losses are going to be so big that nobody's ever going to keep that job. So it needs to be index DAX. It needs to be anchored we politicians and in the parliament. So what are you expecting when you preparing the residents of Norway for in 2023 in terms of returns, if you don't feel very confident that you can get back what you lost last year? I think it's important to make sure that everybody understands that we will not have a repeat of the last 25 years. We had a period where rates were coming down, where globalization was going really well. And we are now in a very difficult situation, very different situation. Now you see a reversal of the globalization. You're seeing rates having moved up. And it's, of course, very unclear where they're going from here. So returns going forward will be different. NIKKEI. I'm really honored. LS this question given your hedge fund expertise and moving on to serving Norway with the huge challenges of Julian's of dollars of money, your philanthropy, etc.. What do you think of America's fixation on windfall profit taxes? Does American hydrocarbons need to be more like what I read about in European or hydrocarbons? What do you think of a windfall profits tax? You know what? The one thing I have learned to this job is I'm not supposed to have any political views whatsoever. And so I think I will pass that question on to somebody cleverer than myself. You see how he put his pro? Yeah. I mean, he's very media trained. He's very easy to get in touch. But he didn't touch that one at all. Then I'm going to look, Nikolai, in what we do forward here. If it's just an index fund and participate, I want you to talk to our people who have not participated in the bounce up in January. They're scared. You know, we make a joke here, Nikolai, about the trivial leveraged or cash fund. How do people scared stiff participate in an index return level? You know, I think the very big question this year. I mean, the trillion dollar question is what will happen to global inflation when China really comes back onstream, when they start to consume the way they have done in the past and so on. Will that drive raw material prices? And will that impact inflation in the rest of the world? Saw that. It saw that the tightening will continue and perhaps even accelerate. Because that is the biggest risk to equity markets. The market does not expect that. And if that happens, we will have a big lake down. There's a question about simplification and whether it's a time to simplify NIKKEI. I know that the Norwegian Sovereign Wealth Fund is talking about reducing significantly the number of companies that it's investing in. Why is that important? Why is that simplicity a main goal of you? Well, I think it's really broad because for the moment, we own 9000 companies around the world when all you know, we own roughly one and a half percent of all the companies in the world, but 9000 companies. And the one thing you can be absolutely sure about when you over 9000 companies, if something goes wrong anywhere in the world, you own it. Soldier goal from 9000 to 6000. I think it's just going to be great. Good. Minimal effect on diversification. Minimal effect on returns, but just reduces complexity and the whole organization. Nicole, I wanted to finish and I think the major question for you guys and you touched on the heart of the big risk for 2023, that's inflation and the potential that inflation is sticky because the big losses last year weren't just that equities were down, it was that bonds were down to NIKKEI. Do you have any degree of confidence that this year the more intuitive relationship between bonds and equities reestablish itself? Well, it's certainly more likely to reestablish it when when rates are higher. I mean, we came in to last year with a return on their bond before little 1 percent. We ended at four point one percent. So that normal relationship is much more likely to hold this year than it was last year. Is sticky inflation a threat to that? Yes, it is. I do think sticky inflation is one of the big threats we have here. Having said that, you know, it's certainly a loan or not. And the thing that really speaks to market is always the stuff you never expected. You know, the financial crisis, the meltdown of the nuclear situation in Japan or the Corvette, the kind of things that you never seen before, where it really causes a lot of fear. That's the real risk. Is there one you're discussing around a table right now? They don't think people are talking about enough. Oh, I think the really scary stuff is the thing you haven't even thought about.

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Norway Wealth Fund CEO Tangen on FY, Strategy, Inflation

Norges Bank Investment Management CEO Nicolai Tangen discusses the sovereign wealth fund's performance in 2022, investment strategy, and the path of global inflation on "Bloomberg Surveillance." (Source: Bloomberg)

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