Sustainability is constructing a portfolio today on the earnings of the future, according to global head of investment content for Towers Watson, Roger Urwin. Not all performance is born equal, he says, and sustainability is performance with purpose. A cap-weighted portfolio is made up of an earnings stream based on today’s conditions, Urwin explains, with any externality unpaid for. He believes ESG is one of those unpaid-for externalities.

“If you played through a decade, then new operating conditions apply, such as carbon pricing, and those externalities will be internalised. Environmental, social and corporate governance is not priced in yet, but it will be,” he says. “This creates the potential to do sustainability alongside fiduciary duty, as you are doing it for finance reasons: buying on tomorrow’s earnings today. People are suspicious of the argument.”

Urwin believes in “sustainability beta” because he believes sustainability is a return driver.

“Take a portfolio long good ESG and short bad ESG over the long term, it will inherit more fair conditions but also a better pricing structure for those investors a decade way.”

The abnormal pricing argument supports smart beta, and anything outside cap-weighted has the potential to perform better than the market. That includes examples such as emerging wealth and sustainability.

Missing the change of generations

Urwin says institutional investors have lost sight of one of their purposes, which is the intergenerational transformation of wealth and risk, and are focused too much on capital formation.

“I’d like to have an industry that is stronger on scores of those dimensions,” he says. “Asset owners are there to pursue their true purpose. The last decade has been all about the financial capitalists, the next decade is about the fiduciary capitalists.”

Urwin doesn’t have a title on his business card. In function he is the global head of investment content at Towers Watson and sits on the Thinking Ahead Group. He’s also an advisory director at MSCI and a board member of the CFA Institute.

He is a mathematician and actuary, graduating from Oxford in 1977 with two degrees: a Master of Science majoring in Applied Statistics and a Master of Arts in Mathematics.

The softer side

But these days he’s more concerned with the “softer” side of institutional investment, looking at behaviour and decision-making, governance and transformational change, rather than a quantitative orientation.

“Finance in many respects came out of a physics-envy model, but behaviour plays a big part,” he says. “These days I’m more interested in the soft stuff, behaviour and decision making, and the effectiveness of asset owners.”

Urwin thinks that asset owners have fallen behind other parts of the financial sector, due in part to the fact they are not driven by the “creative destruction” of competition.

Urwin leads Towers Watson’s research and thought leadership on sustainability, and last year the consultant released its seminal work, Telos, which came to some conclusions on how to invest sustainably.

“Resource scarcity, demography, economic growth and climate change all add up to think about investments in a decade, not a year, but the industry is built on the short term,” he says.

“The sustainability theme has a performance edge so long as you have the resilience to deal with the challenges that can exist of putting you out of line with others.”

There are certain behavioural challenges this presents, and Urwin says that most trustees exercise predictable behaviour when it comes to their fiduciary duty: if they don’t have proof of something then they won’t do it.

“The record of innovation is held back by that,” he says. “Fiduciary is a scary term to many. But it is a powerful term for representing the greater good and we see it as more expansive than the financial return of your direct beneficiaries. There are externalities in any portfolio and you can claim responsibility for that.”

Decency in ownership

To some extent Urwin says personal values are at the heart of this shift, and the “decency that we are owners and have to think about the responsibilities that come with that”.

“The world is so complex, and costs will be shifted on to others, for example carbon/climate risk is not paid for. We need a situation where managers and owners start to have responsibility.”

One of the practical ways to do that is to set long-term mandates, something Towers Watson championed with actual client mandates almost 10 years ago.

“Unconstrained long-term, long-only are the preferred vehicles for Towers Watson,” he says, adding the bulk of its mandates are moving that way. “Mandates that stretch out in time, and have long-term optimisation.”

Towers Watson “believes” in active management, and the move to smart beta is complimentary with that, he says. “Cap-weighted is beatable. Price takes you to a misallocation of capital, you put a lot of money to work on the most expensive stuff.”

In January, presenting at a CFA India conference, Urwin said alpha and beta can be thought of as a continuum differentiated by capacity and skills: there will be reduced expectations for “bulk beta” and pressure on other return sources.

To this end smart beta makes sense, and there is a duality between something that has risk in it and can be turned around as a return driver.

Edwin Meysmans, chief executive of the KBC Pension Fund, sounds extremely relaxed for a man who rises early to avoid Brussels’ clogged roads on the way to the office. Then again, that Meysmans shies away from the madness of commuting crowds should perhaps be no real surprise given that his fund focuses on avoiding being swept along with short-term market moods.

The Belgian recounts enthusiastically – in distinct American tones picked up as a University of Michigan student – how the fund launched a radical liability-driven investment (LDI) strategy in 2007 and has not looked back since.

“We wanted to hedge our liabilities against our interest rate and inflation risk. We explored the options, but we found government bonds weren’t a very good option – only Greece and France were issuing long inflation-linked bonds at the time,” he says.

KBC decided to switch almost its entire bond holdings into interest rate swaps, a strategy that has performed handsomely. The swaps portfolio returned 19 per cent in 2012, surprisingly only its median performance in the past five years – less than the near-25-per-cent returns in the crisis year of 2008 and stellar 33-per-cent returns in 2011, another year when equity markets dropped.

Getting the magic formula right

You would expect Meysmans to be fully satisfied with those results, not least as the funding ratio of the €1.2-billion ($1.6-billion) fund leapt from 100 per cent coverage in 2008 to a 14-per-cent surplus in 2011.

There are loose ends that Meysmans can point to, however. He says that “we use the swap rate as a proxy for the liabilities, but they are actually discounted to the corporate-bond yield curve. While they move in the same direction, the correlation is not perfect.”

Naturally the dramatic shift to LDI in 2007 changed the risk profile of the fund. In place of sovereigns backing up the 40-per-cent bond portfolio, in came large investment banks as counterparties to swaps.  “We tried to control this risk by diversifying it across 12 investment banks and collateral management. We will only accept high class collateral such as cash or highly rated government bonds”, Meysmans explains.

This risk reduction technique saw the fund through the financial crisis in fine shape. “We did replace one counterparty with another as there was an issue, but that only took a couple of days,” he states.

Meysmans thinks the fund was “lucky” to launch its dramatic hedging moves in 2007 when yields were substantially higher than they were today. “An important question is what are we hedging today?” says Meysmans. “How much lower can interest rate yields go from 1.6 per cent?”

A major market risk at the moment to KBC’s hedging strategy is the prospect of rising interest rates in the future. “We are keeping track of that and we have reduced our LDI allocation and duration,” Meysmans says.

An interest rate-rise threat does not compromise the thinking behind KBC’s LDI approach, however. “If it happens, then our liabilities will fall so our funding ratio will more or less stay the same, and that is the whole idea,” he adds. 

The right match

The KBC fund describes itself as a medium-sized investor and Meysmans concedes that significantly larger institutional investors would struggle to find counterparties to back up interest rate swaps.

There is an added advantage for the fund in that the fund’s sponsor KBC Bank, part of one of Europe’s largest banking groups, acts as a middleman in the interest-rate swap deals.

Meysmans explains that as the fund’s sponsor is the official counterparty for the swaps, the fund itself is relieved from a large administrative burden and is freed from any obligation to post collateral should the swaps unwind.

Meysmans also has a personal advantage from the fund’s sponsors. He honed his financial knowledge in 15 years spent working in various departments at KBC Bank before taking the reigns of the pension fund in 1997.

Over the hedge

The interest rate swaps in the fund are leveraged by 200 per cent, effectively meaning that 80 per cent of the KBC fund’s liabilities are hedged. Real estate and equity holdings form the remaining return-seeking part of the portfolio.

Around 11 per cent of the assets are in real estate and infrastructure, holdings that the fund has sought to use to fill the gap between the hedging swaps and pure equity holdings. Meysmans explains that a reduction in listed real estate fund investments in 2007 in exchange for direct real estate, non-listed funds and infrastructure has offered added interest rate hedging and made a major contribution to covering inflation risk.

“We saw before the crisis that the correlation between listed real estate and listed equities is pretty high,” says Meysmans. “The volatility is much smaller in unlisted real estate.”

KBC’s real estate and infrastructure holdings are focused on Europe, with the exception of the UK, which Meysmans feels is too volatile and carries excessive currency risk. He is enthusiastic about social infrastructure such as schools and hospitals due to their capacity to deliver low-volatility returns.

Reducing exposure

While the KBC fund has been striving to reduce its exposure to market volatility, a degree of pragmatism is evident in its treatment of equity holdings in the recent past. The fund began to sell equities as it targeted reducing the equity pool from 40 per cent of holdings to 30 per cent. “After some big discussions with the risk department, we decided to keep the holdings at around 35 per cent, but invest 20 per cent of equity holdings in a low-volatility strategy”, Meysmans explains.

Around 15 per cent of equities were allocated to emerging markets in 2009 to further diversify the portfolio. These new investments have averaged an annual return of 8 per cent from 2010 to 2012, around halfway between sluggish European and strong US equity performance.

KBC’s asset management house manages around 90 per cent of the portfolio, with external managers appointed on non-listed real estate, private equity and infrastructure.

Recognising that different asset allocation portfolios are suitable for investors with different needs, Jason Hsu and Omid Shakernia think it is probably too ambitious to establish a unifying structure for determining benchmark asset allocation portfolios. Instead, they propose a framework for thinking about asset allocation alpha, assuming that investors have suitably determined their asset allocation policy portfolio. And the framework is:

Total Portfolio Alpha = Asset Allocation Alpha + Manager Selection Alpha

Read the report to find out more.

Solving short-termism is being held up by the institutional investment industry as some sort of performance saviour. There have been many attempts at uncovering the problems of, and offering solutions to, short-termism with numerous reviews, conferences and papers discussing the need for long-term investing. These include the incentives and behaviour of asset owners, asset managers and companies.

Columbia University’s Committee on Global Thought held an event on long-term investing with presentations from many of the best investment thinkers including Robert Eccles (Harvard), Jeremy Grantham (GMO) and Joseph Stiglitz (Columbia).

“David Dodd said if you don’t like the management of the company sell the stock, but importantly Benjamin Graham added the provision that you can get a good price, and if you can’t then do something about it,” Patrick Bolton, member of the Committee On Global Thought, said.

In their paper Loyalty Shares: How to reward long-term investors, Bolton and Frederic Samama, head of the steering the committee at the Sovereign Wealth Fund Research Institute, suggest that loyalty shares reward shareholders for long-term investing

In practice this would mean that a company would grant a loyalty warrant to every shareholder then, after a specific loyalty period, a warrant would kick in and vests after another time frame of holding the stock.

Robust thinking

Much of the thinking at the conference, and in other papers and seminars, is robust. But for institutional investors, solutions such as loyalty shares are also kind of Band-Aid solutions.

If instead the asset owners focus on their expectations, then behaviour will change down the chain of service.

If fiduciaries have been acting in the best interest of their beneficiaries, often with 30-plus-year time frames, then they should be setting long-term asset allocation and managing to that anyway.

The real question then becomes what the long-term return expectations of institutional investors are and whether they are realistic.

To some extent the answer rests in reluctance by investors, and their stakeholders and service providers, to adjust their expectations, particularly around the size and predictability of the equity risk premium.

In a response to the recent Kay Review, Gordon Clark has written a paper to be published in the spring issue of the Rotman International Journal of Pension Management. “In many cases, unfortunately, asset holders and their sponsors hold fast to optimistic scenarios regarding the returns to be had in the equity markets of advanced economies. Expectations about the size and predictability of the equity premium are justified by reference to a bygone era,” he says.

The expectation around the equity risk premium, or the expected return for equities, is important because it affects savings and spending behaviour as well as the allocation of assets between risky and defensive poles.

Rethinking the equity risk premium

The CFA Institute research project, Rethinking the equity risk premium, is a collection of papers that revisits 10-year-old research. Edited by managing director and chief investment strategist at TIAA-CREF, Brett Hammond, managing director of research at Morgan Stanley, Martin Leibowitz, and CFA Institute Research Foundation director of research, Laurence Siegel, it presents some new ideas about the equity risk premium.

In 2001 a number of academics set estimates of the equity risk premium, with the estimates averaging 3.5 per cent but coming in as low as 0 per cent (including Arnott and Bernstein, and Campbell and Shiller). The differences varied according to demand and supply considerations, and the supply of cash flows that companies could inject into the market.

The current CFA project is the 10-year anniversary of that initial one, and started with leading academics and practitioners gathering for a day-long discussion on new developments.

The paper defines the equity risk premium also as an equilibrium concept that looks beyond any given period’s specific circumstances to develop a fundamental, long-term estimate of return trends. It is a forward-looking, expectations-driven estimate of stock returns and is critical to fundamental activities in investing, especially strategic asset allocation but also in portfolio management and hedging.

There are many different and new views in the collection of papers. Roger Ibbotson, shows that investors often fail to differentiate a short-term tactical view of the equity risk premium from the more fundamental long-term, supply-driven equilibrium equity premium.

Robert Arnott supports a view that the equity risk premium is cyclical, smaller and more dynamic than prevailing theory of a more stable and robust premium would suggest. He shows that bonds have outperformed stocks over a significant period, excess return has often been lower than the forward-looking ERP, net stock buybacks are lower than is often assumed, lower earnings yields are empirically associated with lower subsequent stock returns and premiums, real earnings and stock prices grow with per capita GDP rather than total GDP, and dividend yields are lower now than ever before.

“When taking this more sobering evidence into account, he finds that the probability of future stock returns matching the 7-per-cent real historical average is slight. Arnott’s estimate of the future ERP ranges from negative to slightly positive,” the paper says.

While there are varied views, most of the authors agree it will be around 4 per cent in the next few years.

On average, US pension funds have a return expectation of 7.5 per cent, and much of this expectation, needed to meet their liabilities, is based on the expectation of returns from the equity market. From where I sit, that is set up to fail.

 

The DKK200-billion ($35-billion) Danish medical professionals pension fund grouping, PKA, wants its government to help satisfy its appetite for investing in major infrastructure projects.

Frank Jensen, an analyst on its asset strategy team, says PKA “is eager to get started” on sealing public-private partnerships with the Danish government, but its plans “have not come as far as expected.”

Jensen says that “we are at the starting line with other funds ready to move on, but the government is waiting to see if it fully supports the idea”. Fears that the Copenhagen government might seek cheaper sources of private finance than the country’s pension capital are a cause of frustration.

Government backing would make direct investment in the complex realm of infrastructure “much easier”, according to Jensen.

Banding together

Despite the apparent obstacles in PKA’s public-private-partnership drive, the issue has at least fostered a real spirit of cooperation among Denmark’s pension funds. PKA has teamed up with ATP, Sampension, PensionDanmark and PFA to form a working group on the potential for public-private deals. “We don’t really have to compete with the other funds as our membership pool is defined by professional groupings,” Jensen says. “Collaborating can help access projects that are too large in themselves for us and make marketing and lobbying more cost-efficient.”

Another Danish pension fund, Industriens Pension, recently joined PKA in taking a $130-million stake in a planned offshore wind farm in the German North Sea.

The deal extends PKA’s involvement in offshore wind – a new form of infrastructure that Danish firms have helped to pioneer. In 2011 a larger investment of $450 million was made in a 25-per-cent share of a Danish wind farm planned to be one of the world’s largest.

The fund’s social responsibility in nurturing Denmark’s energy future was cited at the time as a reason for investing, but Jensen explains that attractive return prospects were also very much a consideration. Although the investment made a loss in 2011 as the tricky task of erecting giant turbines in the sea began, Jensen says PKA expects the Scandinavian winds to deliver a return of around 7 per cent for the 20 years of the project’s operation.

Relying on familiar vehicles

With those kind of figures promised, it is little wonder that Jensen feels infrastructure is a “perfect match” for PKA as an alternative to fixed income under Denmark’s strict pension solvency regulations.

In 2012 PKA made a signal of its intent to pursue the infrastructure alternative by setting up a subsidiary focused on investing $2.1 billion. While government backing will help its domestic infrastructure drive, PKA has relied on the more familiar vehicles such as fund of funds and private equity structures for its overseas infrastructure investments.

Needing to keep a close eye on infrastructure ventures means PKA does not expect to make direct overseas infrastructure investments, but Jensen says it is contemplating investing in mines in Greenland, an autonomous and distant part of Denmark.

Private equity is a more established alternative in PKA’s holdings, at the end of 2011 occupying close to 10 per cent of the portfolio of the group’s biggest pension fund, the State Registered Nurses’ Pension Fund. The newly established alternatives subsidiary has allowed PKA to “move quicker to act on what we see in the market”, in Jensen’s view.

Timber and agriculture are new additions to the group’s alternatives holdings, although its experience in these asset classes has been mixed. Jensen says PKA has found it difficult to locate suitable agriculture funds, while timber investments have not worked as well as expected. “Timber works as an inflation hedge and diversification factor,” he says, “but we need some return along the way, and we have not been satisfied – this year at least.”

From Denmark to Deutschland

However, distinct satisfaction is being felt at PKA over the performance of its bond portfolio, which forms the core of its five pension funds, taking a fraction over half of the space in the State Registered Nurses’ fund at the end of 2011.

Nominal bonds returned some 10.4 per cent for PKA in 2012. Jensen explains that a desire to look beyond Denmark’s borders helped.

“The outlook for Danish bonds really wasn’t that good, so we have very few left. If we need safe bonds, we felt we might as well go for German government bonds as they look like they will return better,” Jensen says.

A hunt for high-yielding debt seems to have paid off for PKA. At the end of 2011 it had a portfolio of global mortgage credit bonds almost half the size of its government bond holdings – this returned 16 per cent in 2012.

Even better returns were recorded by a substantial holding of peripheral European government debt – issued by the likes of Ireland, Portugal and Italy.

Jensen says PKA’s exposure to higher yielding bonds of all forms is about half that to core government bonds, which is about 26 per cent of its overall portfolio. “I think other pension funds have more than that in ‘safe bonds’”, says Jensen, who reckons underweighting Europe’s core “is the best thing PKA did in 2012”.

Jensen concedes that the impact of the recent election in Italy shows that “the euro crisis could rebound on Italy. It is not as huge as the US though, so everyone is still looking across the Atlantic to see what is going on over there.”

Jensen says that the persistence of current low interest rates for a number of years is PKA’s greatest fear.

The Danish investor has been doing its best, however, to use the post-crisis investing environment to its advantage. For instance, it has bought more than $520 million worth of real estate in recent years as prices have dropped.

As for equity holdings, cost efficiency has been the mantra recently, with passive investment favoured for US and European equities. It has also been seeking to implement its own absolute return strategy to compliment its equity portfolio, with return and dividend swaps acquired to reduce exposure to equity market volatility.

On March 8 when Yngve Slyngstad announced the annual results of Norway’s sovereign wealth fund, he did more than unveil a routine set of numbers. The chief executive of The Norges Bank Investment Management (NBIM), which manages the Government Pension Fund Global (GPFG), was also revealing the first results following what he called a “substantial” change in the $680-billion oil fund’s investment strategy last year. “While in 2011 the fund invested NOK 150 billion ($27 billion) of the year’s capital transfers in European equities, in 2012 the fund invested nearly an equivalent amount in emerging bond markets”, Slyngstad observed.

Olsen_Oysten-EDMØystein Olsen (pictured left), governor of Norway’s central Norges Bank, which via NBIM supervises the GPFG on behalf of the government, explained the reason for this shift towards emerging markets in his introduction to the annual report. “On the whole, emerging markets are characterised by factors that, in isolation, contribute to higher risk – in the short term,” said Olsen. “Nevertheless, we believe that over time, the changes that have been implemented are firmly in keeping with the objective of Norges Bank’s management of the fund: safeguarding financial wealth for future generations.” In his own introductory remarks to the report, Slyngstad added that the GPFG’s management seeks “to secure the international purchasing power of future generations by broadening the fund’s exposure to growth in the global economy.” As he also noted when presenting the 2012 results, a significant incentive for reducing the fund’s exposure to Europe is to reduce exchange rate risk; since the start of 2009, Norway’s currency, perceived as a safe haven from Europe’s sovereign debt crisis, has risen more than 20 per cent against the euro.

Still a long way to go?

Based on the 2012 numbers, Slyngstad believes the new strategy is on track, although he cautioned when presenting the results that there is still a long way to go. Last year the GPFG fund delivered a return of 13.4 per cent, or about $80.5 billion, well above the fund’s annual average real return target of 4 per cent, and a sharp recovery from 2011, when the portfolio’s value fell 2.5 per cent. As Slyngstad stressed, “the performance last year was driven by equity investments”, especially in Europe. By contrast, fixed-income investments returned 6.7 per cent, and the fund’s new real estate portfolio – focused on commercial properties in the UK, France and Switzerland – rose 5.8 per cent in value.

Slyngstad also noted when presenting the results that the fund is remains well short of its eventual goal to reduce Europe’s share of the total portfolio to 40 per cent. In 2012, 48 per cent of all assets were held in Europe, down from about 53 per cent in 2011. North America accounted for a further 32 per cent, with Asia (including China) claiming 13 per cent. The United States remained by far the most important focus for the Norwegians, delivering 28.6 per cent of the fund’s overall value in 2012, of which 17.4 per cent came from equities, and 11.2 per cent from bonds. The UK came second, representing about 13 per cent of the fund, split between 9.6 per cent for equities and 3.4 per cent in fixed income.

The Norwegians’ commitment to shift the geographic weight of the portfolio is clear, however, aided by a change last year in the allocation of fixed income investments. Under its revised mandate, the GPFG is now weighting government bonds – which account for 73 per cent of the fixed income portfolio – based on the size of a country’s economy instead of the size of its debt. Furthermore, the mandate authorises the fund to buy bonds in nine emerging market currencies. The outcome in 2012 was an immediate move into emerging market bonds, which altered the profile of the GPFG’s fixed income portfolio. At the end of 2011, emerging-market government debt represented just 0.4 per cent of the bond portfolio; a year later, that had risen to about 10 per cent.

China, the world’s second-largest economy, was the key example. At current exchange rates, the GPFG’s government bond investments soared from about $34 million on December 31, 2011 to about $889 million a year later, based on the global list of fixed income holdings published on Norges Bank’s website at the same time as the annual results. To provide some perspective, NBIM finished 2012 owning $18.54 billion in Japanese sovereign debt, more than twenty times its equivalent China exposure. But the trend by Norway towards selected higher yield emerging-market government bonds is plain.

After China, Mexico offers one of the most striking illustrations of the GPFG’s active presence in developing countries’ debt markets. Last year, the GPFG’s exposure to Mexican sovereign debt shot up from about $500 million at the end of 2011 to more than $4 billion. The GPFG was also an active buyer of Indian government bonds, with about $13 billion in holdings at the end of 2012. It also moved into Russian sovereign debt, with about a $3-billion exposure, and increased its investment in South Korean government bonds to $3.73 billion. Meanwhile, Norway reduced its sovereign exposure to weak eurozone economies, particularly France and Italy, where the GPFG’s government bond holdings dropped sharply.

Emerging market equities and China

While Slyngstad drew attention to the bond portfolio, the fund also aims to increase its equity exposure in developing markets from about 9 per cent in 2012 to 12 per cent. Thanks to Norway’s unrivalled transparency, it is possible to follow the fund’s progress towards this goal through its list of stock holdings, with China again the major test case. In 2012 China accounted for about 1.6 per cent of all the fund’s equity assets, spread across 303 holdings, which overall returned 13 per cent for the year. At the same time, the GPFG consolidated its mainland stock portfolio, which at the end of 2011 contained stakes in about 1000 Chinese companies. Almost all the divestments in 2012 were small caps – names like the Da An Gene Co Ltd, the Shenzhen Wu’er Heat Shrinkable Material Co Ltd and the Wuxi Huaguang Boiler Co Ltd.

The portfolio is now centred around larger national and provincial-level state enterprises, such as China Eastern Airlines, where the GPFG owns 0.03 per cent, and the China Yangtze Power Company (0.04 per cent). As a member of China’s Qualified Foreign Institutional Investor (QFII) program, the fund is allowed to invest up to $1 billion on the Shanghai or Shenzhen stock exchanges. Slyngstad has confirmed that the GPFG has applied for an increase in the quota now that Beijing has removed the upper limit for state-owned funds. He says he expects equity investments in China to be notably higher by the end of 2013.

Real estate, the smallest component of the GPFG’s global investment portfolio, also seems set for rapid growth, as top1000funds.com reported last October. The fund began buying commercial property in the UK and France in 2011, and has since added Switzerland to its European real estate holdings. In 2012, the market value of the GPFG’s expanding property assets reached about $3.96 billion. And in February 2013, the fund bought just under 50 per cent of an office real-estate portfolio valued at $1.2 billion in New York City, Washington DC and Boston from asset management firm, TIAA-CREF, which remains the majority partner.

This is not, in sum, a fund for investment managers accustomed to passive index tracking – either internally or across 55 external mandates. As Slyngstad concluded in his notes for the 2012 annual report, “risk management and active ownership were strengthened”. In the coming years, his pledge to make the fund’s strategy still more transparent means other investors will be able to chart Norway’s progress towards a more globally balanced portfolio.