The head of the NOK915.3 bn (E110bn) Petroleum Fund in Norway has outlined how the scheme’s employees who manage investment mandates are compensated – and signalled a move to more external managers.
Knut Kjaer, executive director of Norges Bank Investment Management, which oversees the fund, said compensation to all employees with investment mandates is related to performance.
Speaking at an investor conference, he said: “We try to avoid committee decisions and empower people to take investment decisions. So everyone is made responsible for their return and their salary is related to that return.”
“People have mandates to pick their managers, and they get compensation according the group of managers within their mandate. So it relates to not only their own performance but all the managers that they have been picking.”
NBIM says on its website: “The main portion of this variable pay element is determined by the performance of the individual person. Some emphasis is also given to group performance and to other, less quantifiable contributions to management and the investment environment.”
Kjaer also said the fund wanted to increase its active management of both equities and fixed income and this would lead to the appointment of more external managers.
“We take only a third of the risk limit given by the Ministry of Finance. So I try to get my head of equities and head of fixed income to take more active risk. The active risk we are taking is not increasing the total risk of the fund, so we should do more active management.
“Regarding external managers, that’s the main charge we have we have for the whole asset management industry - to build up even more comprehensive active management. For the fund that means also taking more external managers.”
Kjaer also said he would like greater stability in the asset management world. The movement of active equity managers into hedge funds, for example, had made manager selection more difficult.
The fund currently has 50 external mandates, with 16 external managers of equity and 10 managers of fixed income.
He was speaking at the Scandinavian Institutional Investors Summit in Oslo (see page 50).