Institutional Investor's Alpha Magazine - November 2008 - (Page 22)

Interview Martin Skancke Minister of Wealth Martin Skancke, the chief asset manager of one of the world’s biggest sovereign wealth funds, takes comfort in long-term goals. By Udayan Gupta T he Government Pension Fund of Norway, one of the biggest pots of public money in the world, goes by other, less formal names too: the Petroleum Fund; Norway’s Oil Fund; the Fund for Norway’s Future. The latter might be a crushing cross to bear if not for the fact that the fund is so gigantic — it had nearly 2 trillion kroner ($294 billion) in assets at the end of June, surpassing the country’s $285 billion GDP and making it the secondbiggest sovereign wealth fund in the world. (Only the Abu Dhabi Investment Authority, which at the end of 2007 had $875 billion in assets, is bigger.) The Norwegian fund, which is celebrating its 12th anniversary this year, is run with a striking layer of checks and balances that might seem at ﬁrst glance to be a barrier to innovation. Its investment strategy is set by the Ministry of Finance, examined and approved by Parliament and managed by Norway’s Central Bank. Though there is much input from many quarters, one man is doing much of the behind-the-curtains lever pulling: Forty-two-year-old Martin Skancke, the boyishlooking director general of asset management at the Ministry, is the guardian of the Ministry palace and the most inﬂuential person in the mix. It falls to him to guide the ship through waters rough and calm and to rally morale in difﬁcult times. His job is made no less daunting by Norway’s popular commitment to socially and environmentally conscious investing. But Skancke seems to have a steady hand on the tiller, emphasizing long-term investment over trading and using the fund as a way to protect Norwegian wealth and to dispel any notion that a small country is by deﬁnition an insigniﬁcant player (Norway’s population is about 4.7 million). “We believe, for instance, that equities — over time — give a certain premium over less risky assets,” explains Skancke, a graduate of the Norwegian School of Economics and Business Administration and the London School of Economics, who has been with the Finance Ministry since the early 1990s, working largely on monetary policy and public ﬁnance. From 2002 to 2006 he was head of the domestic policy department; he then took over asset management, where he charts global strategy. “We also believe that less-liquid assets will give a premium over time. And we believe that diversiﬁcation is the only free lunch in ﬁnancial markets.” Part of that diversiﬁcation is seen in the fund’s willingness to invest in market-based hedge funds, especially long-short equity funds; it puts as much as 10 percent of assets in hedge funds. Skancke has generally steered clear of synthetic assets, especially after the Citigroup–Terra Securities scandal, in which eight Norwegian municipalities invested in high-risk hedge fund derivatives in 2001 22 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2008

Institutional Investor's Alpha Magazine - November 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Risk Rewarded The Good Guys: In the Here and Now Interview: Minister of Finance Cover Story: The Agony of Dan Zwirn Strategies: The Early Birds Are Awake Strategies: The Call of Shari’a Profile: Sweet Home Chicago Research Center: What Stampede? Alpha Bytes: Centralize the Data Unhedged: Commentary: Learning from the Wreckage

Institutional Investor's Alpha Magazine - November 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.