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How Norway spends its $882B global fund

economist.com

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Re: How Norway spends its $882B global fund

#61

Post by auntienomen »

alasdair_ wrote: post #54
xiaoma wrote: post #43

Earlier quoted context omitted.

That's just not true. Joel Greenblatt's fund beat an annualized return of 40% from 1985 to 2006. Carl Icahn got over a 30% per year annualized return from 1968 to 2011 . That's almost 50 years!

Right, and a lottery winner who wins a $500MM jackpot on a $1 ticket has annualized return of even more than that, when annualized over the same timescale. None of that matters if you can't pick the winning players in advance. With enough variance and enough players, someone will eventually have double-digit annualized returns over decades, it doesn't mean that they are necessarily superb investors.

What would you think if you saw someone win the lottery 2 months out of every 3 for 20 years?

Re: How Norway spends its $882B global fund

#62

Post by ckinnan »

mburns wrote: post #37
dogma1138 wrote: post #25

Earlier quoted context omitted.

That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund ) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Overall…

>The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.

In fact you are wrong. The SS Trust Fund holds no real assets. It holds non-marketable IOUs from the Treasury. They do not invest in Treasurys, although the SS surplus is spent by the federal government. There are no actual assets and there is no real trust fund, it is just an accounting scheme. Treasury will need to raise taxes, cut spending, or borrow cash on the open market to repay the IOUs.

Re: How Norway spends its $882B global fund

#63

Post by executive »

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.

"From 1994 through mid-2014 it averaged a 71.8% annual return."

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

Re: How Norway spends its $882B global fund

#64

Post by ckinnan »

dogma1138 wrote: post #40
mburns wrote: post #37

Earlier quoted context omitted.

>The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one. Correct me if I'm wrong, but the SS Trust Fund has to exclusively buy Treasury bonds, while other sovereign funds make investments in the public stock markets, etc. Seems an important difference.

Different sovereign/public funds have different regulations, they are usually split between equity and fixed income, Norway splits it to 60% equity, 5% real estate, and 25% fixed income. As far as the fixed income goes most of it is invested in treasury bonds, while the equity is invested in primarily the international stock markets. Overall the Social Security Act does disallow prefunding of the fund with marketable…

Actually the state funds do hold real assets but the federal system does not, there's no $3 trillion dollars to invest, the Social Security Trust Fund is just a non-marketable claim on the U.S. Treasury. It is an accounting placeholder-- a promise if you will-- there are no assets of any kind backing it. When the IOUs come due the Treasury will have to cut spending, raise taxes, or borrow new funds.

Re: How Norway spends its $882B global fund

#65

Post by robryan »

010a wrote: post #59
kristofferR wrote: post #12

Earlier quoted context omitted.

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).

Are you aware how much 0.25% of $800 billion dollars is? Now, go ahead and complain about a $60M compensation.

So at this stage factoring in the active management cost they are outperforming the market. Of course we don't know in the long run whether that will continue to be the case.

Re: How Norway spends its $882B global fund

#66

Post by Gustomaximus »

alasdair_ wrote: post #54
xiaoma wrote: post #43

Earlier quoted context omitted.

That's just not true. Joel Greenblatt's fund beat an annualized return of 40% from 1985 to 2006. Carl Icahn got over a 30% per year annualized return from 1968 to 2011 . That's almost 50 years!

Right, and a lottery winner who wins a $500MM jackpot on a $1 ticket has annualized return of even more than that, when annualized over the same timescale. None of that matters if you can't pick the winning players in advance. With enough variance and enough players, someone will eventually have double-digit annualized returns over decades, it doesn't mean that they are necessarily superb investors.

The BIG difference is someone can go invest in Greenblatt or Icahn's fund with a reasonable expectation of these returns ongoing. Not so with a lottery winner.

Re: How Norway spends its $882B global fund

#67

Post by refurb »

vertex-four wrote: post #32
refurb wrote: post #30

Earlier quoted context omitted.

Norway also has foreign debt of greater than $600B or 75% of the Global Fund.

Many countries have very large foreign debts and nothing similar to the Global Fund, so Norway is still doing far better off, relatively speaking.

Didn't mean to infer otherwise. I agree Norway is doing quite well, but when you look at the credits and debits it puts things in a different perspective.

Re: How Norway spends its $882B global fund

#68

Post by refurb »

webbore wrote: post #29
netcan wrote: post #26

Norway's oil money story is one of the weirdest. Are there any examples in history where a country has saved up such a big stash? Are they planning to retire young, as a nation?

I live in Calgary, Alberta which is pretty much the exact counterpoint to Norway with a very similar historical starting point (size, population, dynamics). It doesn't matter who's in power, all our governments spend like drunken sailors on shore-leave, no sales tax to even out the boom/bust (and counter low-ish taxes), A savings fund that is now empty going into an incredibly rough period. I'm not says one is better…

Alberta did spend most of the their oil money. Based on a Google search, it looks like the Heritage Trust Fund maxed out at ~$20B for a population of ~2.5M. So maybe 1/20th of what Norway has put away on a per capita basis?

Re: How Norway spends its $882B global fund

#69

Post by greenleafjacob »

alasdair_ wrote: post #54
xiaoma wrote: post #43

Earlier quoted context omitted.

That's just not true. Joel Greenblatt's fund beat an annualized return of 40% from 1985 to 2006. Carl Icahn got over a 30% per year annualized return from 1968 to 2011 . That's almost 50 years!

Right, and a lottery winner who wins a $500MM jackpot on a $1 ticket has annualized return of even more than that, when annualized over the same timescale. None of that matters if you can't pick the winning players in advance. With enough variance and enough players, someone will eventually have double-digit annualized returns over decades, it doesn't mean that they are necessarily superb investors.

How would your position be falsified? You could always say that later someone will revert to the mean.

Re: How Norway spends its $882B global fund

#70

Post by Gustomaximus »

shiven wrote: post #18
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…

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."

I dont have pics, but insight. Typically these are funds exclusively for high net worth individuals. They are not advertised. They select who they let in and have limited pools of investment given they invest in areas/business that dont scale to trillion dollar levels type thing. They get to invest in business etc before the open market via their relationships which is I assume why they can get these returns. My source is a friend who is a partner in one of these funds. They average well over 20% return before fees. Typically they want people with $50m investable before your worth the conversation. And the sad thing for people like us is they are typically asked to preserve wealth (aka make sure I'm never poor) and and growth is secondary consideration.
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