Norwegian Wealth Fund: CEO warns of low returns

Norway's sovereign wealth fund, also known as Norges Bank Investment Management, with assets of $1.5 trillion, is preparing for a period of lacklustre market performance in the coming years. The fund's chief executive, Nicolai Tangen, warned in a statement at the World Economic Forum in Davos of low returns that could be affected by rising inflation.

In an interview with Bloomberg Television , Tangen said he was not overly optimistic about yields because there are underlying inflationary pressures that could persist for an extended period of time. He expects international central banks to be cautious in cutting rates to avoid weakening the economy too quickly.

"We are not overly optimistic about yields. There are more underlying inflationary pressures and I think they will stay there for a longer period of time. I think international central banks will be very, very cautious about cutting rates too quickly because they have been too slow in raising them."

Norges Bank CEO Nicolai Tangen

The Norwegian fund, which aims to invest Norway's oil and gas revenues abroad, owns stakes in more than 9,000 companies, representing about 1.5% of all shares in global listed companies. The fund has a unique overview of the state of the markets, not only in equities, but also in fixed income, real estate and renewable infrastructure.

Rising inflationary pressures around the world, high wage demand and the effects of climate change are negatively impacting prices. Although the market is facing various challenges, Tangen believes the worst of the jumps in the cost of capital are probably behind us and expects some normalisation in the future.

"You know what really derails things are things that we never thought about: the financial crisis, the earthquake, Covid, those kinds of situations, that's what's going to derail it, and we don't know what the joker for 2024 is going to be, but it's definitely going to be something that none of us thought about."

Norges Bank CEO Nicolai Tangen

He referred to remarks by BlackRock Inc. vice chairman Philippe Hildebrand, who pointed out that slowing consumer price growth can create a false sense of security in financial markets.

The Norwegian Wealth Fund, despite third-quarter losses, remains a key player in global markets, and Tangen stresses the importance of the fund's long-term strategy.

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