Asset Allocation

NBIM to major on contrarianism and technology over the next three years

Norges Bank Investment Management, NBIM, investment manager for Norway’s NKK 12.72 trillion ($1.28 trillion) Government Pension Fund Global, has unveiled its latest investment strategy for the period 2023 to 2025 outlining a contrarian approach that will capitalise on periods of volatility plus boosted, internal technology expertise in its quest to become the best, large investment fund in the world.

“We have made a detailed plan which outlines how we intend to become the leading large investment fund in the world. We look forward to implementing this plan over the next three years”, said CEO Nicolai Tangen, speaking at the launch of the strategy.


NBIM will increasing use active management to exploit periods when it believes “variations in asset prices are excessive.” Such positions will apply across the fund’s equities, fixed income and real assets exposures. “Our active risk-taking will vary as market conditions change,” the report says.

NBIM manages assets close to a benchmark index comprising 70 per cent equities and 30 per cent fixed income.

However, the asset manager believes some investment opportunities merit diversifying beyond the reference index, particularly in unlisted assets. “All our investment processes have active elements,” it states. “This improves our ability to achieve the highest possible return and to be a responsible owner. Our long horizon enables us to act differently from other investors in difficult and illiquid markets. We believe that the most profitable investment opportunities arise in volatile markets.”

NBIM uses a range of investment strategies grouped into three main categories: market exposure, securities selection, and fund allocation applied across equity, fixed income, and real asset management.

Contrarianism will be a key part of strategy going forward. “We will seek to buy when others want to sell and sell when others want to buy,” says the report, adding NBIM will support portfolio managers who “dare to be contrarian and avoid herd behaviour.” The asset manager will also develop its investment simulator to analyse investment decisions, systematically learning from mistakes, and providing portfolio managers with feedback so that they can make better decisions in the future.

The largest element of the equity allocation is managed internally in the market exposure strategy. NBIM invests broadly in the companies in the benchmark but seeks to avoid mechanical benchmark replication with its high trading costs. NBIM also enhances return by following a diversified set of index refinement strategies, such as corporate action and capital market strategies. Going forward, the fund plans closer collaboration between traders and internal portfolio managers and says it plans to further automate trading processes.

Forensic analysis

In the fundamental strategy, NBIM pledges to expand “forensic accounting and behavioural analysis to reduce exposure to companies” it expects to underperform. It will take slightly larger stakes when it has reason to believe companies will outperform and will also use external managers in segments and markets where it believes they will enhance returns – or mitigate losses. NBIM will also pursue opportunities to invest in companies before they list, pre-IPO. “This would give us access to companies earlier in the company life cycle and potentially enhance returns.”

Fixed income

The main purposes of the fixed income portfolio is to dampen fund volatility, provide liquidity, and harvest risk premia in the bond market, says the report. As in equities, NBIM will invest in selected segments outside the 30 per cent allocation to diversify the portfolio and harvest risk premia. It will invest in corporate bonds based on company research, utilising its company knowledge across equities and fixed income.

Between 2016 and 2020 the relative performance for internal fixed-income management was 45 billion kroner ($5.1 billion), the most successful period for the allocation in the history of the fund. The allocation is run by a team of 25 portfolio managers, 10 analysts and 15 traders across different time zones invested across geographies, currencies, sectors and types of issuers.

Real estate

In real estate, NBIM will target an allocation of between 3–7 percent of the fund. The portfolio, which consists of listed and unlisted real estate, will actively exploit periods of disruption in the market. NBIM will target more development projects in the coming years and will adapt investments to meet increased demand for energy efficiency and flexibility in buildings. “To access the most attractive assets at acceptable risk, we will invest alongside best-in-class investment partners with a proven development track record,” it says.


Elsewhere the strategy outlines the investor’s pledge to develop tailored trading solutions. “We will buy adaptable and well-proven solutions externally when appropriate,” it says. “We will use our immense set of market and non-market data to support machine learning with the aim of strengthening our investment processes.”

Rather than use consultants, NBIM plans to hire and develop its own people, developing an internal, expert, technology culture in the coming years. “A close relationship between technology and the rest of the organisation ensures that technology developments are tailored to our needs,” it says.


NBIM integrates responsible investment and ownership at three levels. It works at the market level to elevate global standards for all companies; it works at the portfolio level to monitor ESG information and integrate this into the management of the fund and it works at the company level to promote good governance and sustainable business practices. “We will be a transparent and result-oriented owner. We will continue to develop our activities in collaboration with companies, peers, academia, and other stakeholders,” the report concludes.



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