How Norway spends its $882B global fund • Hacker News Board

Re: How Norway spends its $882B global fund

#11

Post by finstell » Wed, Sep 21, 2016, 9:25 PM UTC

charlesdm wrote: post #6

kristofferR wrote: post #3

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215…

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based ass…

> 20-30-40% per annum, for over 20 years

It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

Re: How Norway spends its $882B global fund

#12

Post by kristofferR » Wed, Sep 21, 2016, 9:26 PM UTC

finstell wrote: post #11

charlesdm wrote: post #6

Earlier quoted context omitted.

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based ass…

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

Yeah, the oil fund averages just 0.25% above index, and that's without the extra cost of being actively managed factored in (although its huge size probably makes it impossible for it to be passively managed).

Re: How Norway spends its $882B global fund

#13

Post by hellogoodbyeeee » Wed, Sep 21, 2016, 9:29 PM UTC

harryh wrote: post #2

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

The US would need 56 trillion to achieve the same level of per capita income

Re: How Norway spends its $882B global fund

#14

Post by avn2109 » Wed, Sep 21, 2016, 9:31 PM UTC

finstell wrote: post #11

charlesdm wrote: post #6

Earlier quoted context omitted.

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based ass…

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

>> "...impossible..."

https://en.wikipedia.org/wiki/Renaissance_Technologies

"...famed for one of the best records in investing history, returning more than 35 percent annualized over a 20-year span..."

Re: How Norway spends its $882B global fund

#15

Post by dogma1138 » Wed, Sep 21, 2016, 9:32 PM UTC

harryh wrote: post #2

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gd...

This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is a trend of creating a new generation or class of indentured citizens.

Many EU countries need to look at germany and start reducing housing prices, one of the main contributors to Germany's low household debt is a 10 year cap on mortgages.

Countries like Sweden and Norway just now starting to cap it, Sweden capped the mortgage term to 105 years (no this isn't a typo) this year and the current average mortgage term in Sweden is still over 140 years, and Norway isn't much better off (It was slightly higher than Sweden IIRC I just can't find a source atm).

While the Nordic countries take pride in their model the current economics are pretty bad under the surface, you have a combination of inflated housing prices, extreme housing shortages, and mortgages that can span over 3 generations.

To some extent the Nordic model isn't a choice it's an outcome of the economic policy to the point where a lot of people that appear to be wealthy are actually in dire debt and dependant on the state.

http://www.telegraph.co.uk/personal-banking/mortgages/sweden...

Re: How Norway spends its $882B global fund

#16

Post by adventured » Wed, Sep 21, 2016, 9:34 PM UTC

finstell wrote: post #11

charlesdm wrote: post #6

Earlier quoted context omitted.

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based ass…

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

Continuously? Ok, perhaps that would be almost impossible, to pull off 20% for 20 years without missing a year.

However, Buffett and Soros managed to average above 20% annual returns over 30 plus years.

For example in the 1960s Berkshire returned 28.3% per year averaged. In the 1970s it returned 22.2% per year averaged. In the 1980s it averaged 39.1% (!) per year. In the 1990s it averaged 20.5% per year.

Nobody would hold their breath on another investor matching Buffett or Soros. It is in fact possible though. The big problem for the Norway fund is obviously the scale. Berkshire at $360b in market cap, will struggle perpetually going forward with keeping up with the S&P 500 over time (as is frequently noted by Buffett).

Re: How Norway spends its $882B global fund

#17

Post by TuringNYC » Wed, Sep 21, 2016, 9:34 PM UTC

pveierland wrote: post #4

kristofferR wrote: post #3

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215…

Anecdotally; I spoke to a person from "Norges Bank Investment Management" today at a careers fair about this issue, and apparently this example of using active external investors is something that they have been avoiding since, and that the magnitudes of their internal bonuses are far more restrictive.

This is a very good point. A very simple scenario would be that all the money is placed in super-thrifty ETFs with .05% fees. When you have figures as high as $882B, those outside management fees get large. In this case, it would be 441M!

Re: How Norway spends its $882B global fund

#18

Post by shiven » Wed, Sep 21, 2016, 9:34 PM UTC

charlesdm wrote: post #6

kristofferR wrote: post #3

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215…

$60m isn't exactly the real cost to the government, though? Assuming this asset manager is a Norwegian resident, he'll pay a ton of tax (income or corporate tax, VAT, stamp duty on property purchases, capital gains, etc etc) on that money, and eventually given enough time, most will just flow back to the government. The house always wins.. Also, it depends on how much he brings in. For example, there are US based ass…

For example, there are US based asset managers with private funds that generate 20-30-40% per annum, for over 20 years.

Pure Horseshit. Plain and simple.

Or, in other words: "Pics. Or it didn't happen."

Re: How Norway spends its $882B global fund

#19

Post by melling » Wed, Sep 21, 2016, 9:40 PM UTC

avn2109 wrote: post #14

finstell wrote: post #11

Earlier quoted context omitted.

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

>> "...impossible..." https://en.wikipedia.org/wiki/Renaissance_Technologies "...famed for one of the best records in investing history, returning more than 35 percent annualized over a 20-year span..."

And they used algorithms:

https://www.youtube.com/watch?v=QNznD9hMEh0

Re: How Norway spends its $882B global fund

#20

Post by Havoc » Wed, Sep 21, 2016, 9:41 PM UTC

kristofferR wrote: post #3

"It is run frugally and transparently" is a dubious claim, at least according to claims made on NRKs Folkeopplysningen (a show like Penn and Teller: Bullshit, just better). The fund spends a lot on being actively managed, one manager received ~$60 million in bonuses in 2010. However, they won't reply when people ask if bonuses are actually financially beneficial. https://tv.nrk.no/serie/folkeopplysningen/KMTE50009215…

I'd venture that at that scale you don't really have much of an option except going active. Passive is essentially swimming with the stream, but what if you're big enough to affect the stream...you're kinda active in a way already right there.