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

Re: How Norway spends its $882B global fund

#111

Post by tomp » Thu, Sep 22, 2016, 7:51 AM UTC

tormeh wrote: post #23

avn2109 wrote: post #14

Earlier quoted context omitted.

>> "...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..."

People have done it before. It has always turned out to be luck. Fantastic track record until they cease being lucky. So, cynicism and economic orthodoxy aside, that sounds like a really cool company. Has anyone tried just tossing a big dumb neural network on stock data and investigated whether it can make money? It sounds very obvious, but a quick googling returns little. But I guess the investment industry is prett…

You've no idea what you're talking about.

Renaissance technology is a quantitative trading company, meaning they use computers to trade; they probably do thousands of trades per day, and consistently make a profit. There's approximately 0% chance that it's just luck.

Now, you might say, they were lucky to stumble upon a strategy that works. You can also say that the strategy will stop working at some point (because of competition), so their "luck" will run out, and they might not get "lucky" in time to find a new strategy. But their past performance was most definitely not just "luck".

Btw, in most other professions (e.g. the arts, technical inventions, sports) we call this kind of "luck", "skill".

Re: How Norway spends its $882B global fund

#112

Post by kagamine » Thu, Sep 22, 2016, 7:54 AM UTC

Dolores12 wrote: post #93

bkanber wrote: post #81

Earlier quoted context omitted.

The Norwegian 10Y treasury bond has a coupon rate of 1.3% (lower than the US T-Note! suffice to say, very cheap). The wealth fund has been growing around 8% per year. Borrow money at a rate of 1.3%, reinvest it and make 8%. It's one of the golden rules of banking: if you can borrow money for cheap, do so.

The fund generated an annual return of 5.5 percent between 1 January 1998 and the end of the second quarter of 2016. After management costs and inflation, the annual return was 3.6 percent. https://www.nbim.no/en/the-fund/return-on-the-fund/

But does that not include a sharp dive during 2 recessions in Europe?

Re: How Norway spends its $882B global fund

#113

Post by tomp » Thu, Sep 22, 2016, 7:54 AM UTC

tormeh wrote: post #105

hueving wrote: post #100

Earlier quoted context omitted.

Are you seriously asking if hedge funds that pay hundreds of thousands of dollars salary to top experts from all kinds of fields have investigated using machine learning?

Obviously someone has, but I want to know the results.

You can't just "toss a NN to stock market data" and expect good results. There's too little historical data, you can't easily "generate" more data for the network to learn from, making it really easy to overfit. In other fields (e.g. computer vision) a lot of research has been focused on inventing techniques that prevent overfitting, thus enabling "learning" (i.e. generalization of patterns), such as dropout, convolutional neural networks, flipping/rotating images, etc. Very few of these techniques can be applied generally.

Re: How Norway spends its $882B global fund

#114

Post by gmunu » Thu, Sep 22, 2016, 7:55 AM UTC

jellicle wrote: post #60

010a wrote: post #57

Earlier quoted context omitted.

The difference between $60k and $60M, for a fund nearly a trillion dollars large, is worth it if that person worth $60M can eek out even a few extra basis points in returns. Despite what many people believe, there are those out there who have an eye for value, and _can_ pick stocks.

> there are those out there who have an eye for value, and _can_ pick stocks. There's simply no evidence that is true at all. Every study of this issue says the exact opposite: there's no one out there who can pick stocks.

Actually, I think the studies generally show that active mutual funds do beat the market, but before fees. Their alpha, while real, is tiny and more than eaten by their fees.

Yet remember that active mutual funds manager fees are close to 1%. If you pay $60M on $900B, we're talking about paying less than 1 bp! So if you have an average active mutual fund manager running your $900B fund for $60M, you might hope to beat the market by a few basis points.

Re: How Norway spends its $882B global fund

#115

Post by kagamine » Thu, Sep 22, 2016, 7:58 AM UTC

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 think the idea is that why trade in oil or gas, forestry or fishing, when you can trade in money? The way the global economy works being that money is not a result of other industries but an industry, a commodity, in and of itself. Money has its own industry, so just produce that instead of oil. Could that not be the long term plan?

Re: How Norway spends its $882B global fund

#116

Post by kristofferR » Thu, Sep 22, 2016, 8:00 AM UTC

FullMtlAlcoholc wrote: post #86

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…

If you're successfully managing nearly a trillion dollars, that's a bargain. There are CEO's who run billion dollar companies into the ground and receive more compensation than that!

The manager who received $60MM was managing assets worth $325MM.

The fund has also started to become active in pushing for lower executive pay...

http://www.bbc.com/news/business-36185925

Re: How Norway spends its $882B global fund

#117

Post by hjnilsson » Thu, Sep 22, 2016, 8:02 AM UTC

rer wrote: post #88

In the "Top of the World" graph in the article, there's a dip for Saudi Arabia. Does anyone know why?

Saudi Arabia significantly cut the oil price (which caused the global dip), and is since making up the difference by withdrawing from the oil fund.

The long term goal here is not entirely clear, but it mostly seems like a way to hurt the Russian economy and the fracking industry.

Re: How Norway spends its $882B global fund

#118

Post by kristofferR » Thu, Sep 22, 2016, 8:07 AM UTC

tomp wrote: post #110

olalonde wrote: post #92

Earlier quoted context omitted.

> is worth it if that person worth $60M can eek out even a few extra basis points in returns [...] and no one else could/would have performed better for less than $60M.

That's not the point. The way compensation works, usually, is that you say, "if you do well, we'll pay you this much", where "this much" depends on how well the person does. You can't change your mind post-fact, "well, anyone could have done this well, so we won't actually pay you this much".

The funny thing is that in this case they actually somehow managed to pay him half of what he was entitled to according to their agreement.

Re: How Norway spends its $882B global fund

#119

Post by cmdkeen » Thu, Sep 22, 2016, 8:13 AM UTC

gmunu wrote: post #114

jellicle wrote: post #60

Earlier quoted context omitted.

> there are those out there who have an eye for value, and _can_ pick stocks. There's simply no evidence that is true at all. Every study of this issue says the exact opposite: there's no one out there who can pick stocks.

Actually, I think the studies generally show that active mutual funds do beat the market, but before fees. Their alpha, while real, is tiny and more than eaten by their fees. Yet remember that active mutual funds manager fees are close to 1%. If you pay $60M on $900B, we're talking about paying less than 1 bp! So if you have an average active mutual fund manager running your $900B fund for $60M, you might hope to bea…

What you also have to appreciate is that the fee scales you mention are for you investing $10,000 with an active manager. If you're investing billions you won't be paying anything close to that. If you have the world's largest sovereign wealth fund you're operating at a scale even larger than that.

Re: How Norway spends its $882B global fund

#120

Post by atheg33 » Thu, Sep 22, 2016, 8:23 AM UTC

gaius wrote: post #102

atheg33 wrote: post #99

As a Canadian I feel so cheated learning about Norway's Oil Fund. Our government hasn't hardly saved a dime of our Oil Income. We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. >Most of the oil companies exploring for oil in Alberta were of U.S. origin, and at its peak in 1973, over 78 per cen…

We have been taking a small cut of the hundreds of thousands of barrels of oil we have been producing daily for the past 100+ years and spending it as fast as we possibly can. Right, but the money was spent on something tho'. So the question - and I don't know the answer - is whether having that thing, at the time, was worth more than having something else, in the future.

It just seems like if we had of kept the money and re-invested it... like Norway did... that we would have been much better off in the long run.