Wanted: Someone to run the world’s biggest sovereign wealth fund. Candidates must be Norwegian and able to resist the urge to mouth off about government tax policy. Don’t apply if you’ve ever flown government officials back from a shindig in the U.S. on a humongous private jet. The successful candidate is unlikely to be a fan of Sting…
The scandal that’s prompted Norway to review Nicolai Tangen’s appointment to run its $1 trillion wealth fund is embarrassing for all involved. The country’s central bank, which is responsible for the fund and its management, finds itself accused of being less than transparent about how the 53-year-old, a very successful hedge fund manager, got the job when he didn’t feature on the initial list of applicants. Its supervisory council plans to submit questions in writing, following an extraordinary meeting to discuss the affair held on Wednesday.
The fund’s current chief, Yngve Slyngstad, was probably entitled to attend the private seminar Tangen organized at the University of Pennsylvania’s Wharton School in November, even though the event did smack of an offsite jolly. Theconference for 150 people featured appearances by superstar chef Jamie Oliver, Olympic sailing champion Annie Lush, jazz singer Gregory Porter and none other than Sting. It cost at least $3 million, according to calculations by Bloomberg News based on information provided by Tangen. That works out at $20,000 a head — quite a shindig.
But after 12 years at the helm of the nation’s piggybank, Slyngstad should have known that letting Tangen pay for his return home with other guests on a chartered jet — Crystal Skye, the world’s newest and most spacious luxury Boeing 777, was just one of the planes rented for the trip, according to Norwegian newspaper VG — was never going to fly.
The acknowledgment of that error in judgment, with the central bank pledging to refund the cost, comes a day late and a dollar short. Even if Slyngstad had nothing to do with Tangen’s selection, that the candidate took advantage of the gathering to broach the job opening with him (as revealed in e-mails published recently by the central bank) should have rung alarm bells and prompted him to take a commercial flight home.
It’s tempting to sympathize with Tangen and the tangle he finds himself in this week. The November event was clearly a once-in-a-lifetime opportunity to gather the great and good at his alma mater, Wharton. Yet the Jan. 6 e-mail in which he asks Slyngstad for advice on his “hard to fill” shoes at Norges Bank Investment Management — “we touched briefly on that in Philadelphia” — is hard to reconcile with the central bank’s account that Tangen’s name only came up in December, once the headhunting firm they’d hired got to work.
Tangen’s questionable musical taste in paying $1 million for the singer Sting to perform at the gathering could be reason enough to bar him from public office. Joking aside, though, that fee to hear the former bassist with The Police crooning “Roxanne” or “Fields of Gold” was about a third more than Slyngstad’s total earnings from his job last year. Talk about conspicuous consumption.
The prestige of running the world’s biggest wealth fund was clearly enough to attract Tangen to abandon Ako Capital LLP, the $16 billion fund he founded, foregoing future wealth. But his misstep in telling the media last month that he supports an inheritance tax that would be levied at a rate of 100% illustrates just how difficult it can be for a hedge-fund star who’s accustomed to saying what he likes (and liking what he says) to bow to the yoke of public service. He later acknowledged the comment was inappropriate because it could potentially be “interpreted politically.”
Running the Norwegian fund is the best job in finance because of the sheer scale of the train set you get to play with, Tangen told my Bloomberg News colleague Mikael Holter last month when news of his appointment and September start date was announced. He explained that with about $1 trillion of assets, “you only need to create a small excess return in percent for it to turn into enormous amounts.”
That can cut both ways, though. You only need to implement a small wrong-way deviation from your benchmark to create enormous losses. Given that the fund sees itself mostly as an index tracker, albeit one that dwarfs the rest of industry, is a high-flying hedge fund manager really the best candidate to look after the nation’s savings?