Norges Bank Investment Management (NBIM) which oversees Norway’s sovereign wealth fund managing the country’s oil and gas revenues, is expanding its investments in hedge funds to include mandates to Asian, US and European long/short external managers. The number of managers and invested value will depend on market opportunities, said Erik Hilde, global head of external strategies at NBIM.
NBIM already invests in internally managed long/short funds. The investor also allocates approximately $90 billion to 110 external fund managers, all of whom follow bottom-up fundamental investment strategies.
“Everything will continue to be managed within our mandate and within the limits we have for deviations from the index,” said Hilde, who added that fees will be structured similarly to NBIM’s existing external mandates.
The strategies will be held in separately managed accounts. Hilde said that under the strategy, NBIM’s external managers will borrow stocks held in NBIM’s large index portfolio to position on falling prices, selling them in the market. “This way the fund avoids being net short in any company, even though some of the mandates will be long/short,” he explained.
According to NBIM’s public invitation to tender, the investor plans to award mandates across long/short and market-neutral strategies with initial funding for each mandate ranging from $150 million to $500 million. NBIM is looking to allocate mandates to single-country long/short equity strategies in Australia and Japan, regional long/short strategies focused on Europe, and long/short equity strategies in the US, where it is looking for expertise in healthcare and technology in particular.
The open invitation to external managers reflects growing investor interest in long/short equity strategies as market volatility and stock dispersion create fresh opportunities for active managers. NBIM’s move also comes as some investors grow increasingly concerned that equity market valuations look stretched, increasing the risks for long-only investors at a time when the impact of President Trump’s policies on the US economy, particularly his tariff plans, remains unknown.
Equities account for 70 per cent of the total assets under management. NBIM has a 27.7 per cent allocation to fixed income and a 1.9 per cent allocation to unlisted real estate. Last April, Norway’s finance ministry rejected NBIM’s petition to invest in private equity citing higher fees, lower transparency of information, and the need for a broad political consensus.
Today’s new uncertainty contrasts with last year. NBIM attributes its 2024 return of 13 per cent to gains in global equity markets supported by solid corporate earnings, more optimistic growth expectations and declining inflation expectations.
Still, in 2024 the overall contribution from security selection was negative. External management made a positive contribution, but the negative contribution from internal management was larger. “The security selection strategy is not expected to contribute positively to the fund’s relative return every year, and the results for 2024 followed a period of five consecutive years of positive contributions from security selection,” states the fund.
NBIM has delivered annualised returns of 7.5 per cent over the past decade.
The fund had a 0.6 per cent loss in the first quarter of 2025 largerly weighed down by equities, which recorded a loss of 1.6 per cent or 415 billion kroner ($39 billion) driven by fluctuations in the tech sector.
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