Norway’s auditor slams manager fees as ‘reprehensible’

Norway’s Finance Ministry is under fire for huge fees paid to external fund managers of the NOK3 trillion ($478 billion) Government Pension Fund, with the country’s auditor general criticising Norges Bank as “reprehensible” for paying out NOK500 million ($81 million) on a mandate of NOK3.3 billion ($534 million).

Adding fuel to the fire, State Secretary Hilde Singsaas (pictured) appeared to defend central bank Norges’ $81 million payment to Malaysia’s Pheim Asset Management when she said high-quality managers cost money, and that high fees showed managers had earned the world’s second largest fund “far more”.

The Office of the Auditor General said in its report to Norway’s parliament, the Storting, that it “considered reprehensible that Norges Bank entered into a contract with an external manager without determining an upper limit for performance-based remuneration”.

In responding, Singsaas said it was “expensive to engage the best managers” and that “when external managers have [been paid that] much money … the fund has earned far more”.

“Therefore,” she continued, “I have pointed out that it is wrong when the Office of the Auditor General says there is little money left in the Fund (due to) high fees”.

Sponsored Content

But, at the same time, she agreed that “salary and bonuses in the financial industry in general (are) unreasonably high”.

Auditor General Jorgen Kosmo said, in his 274-page probe of all government spending, that his office was “particularly critical” of certain areas.

“The Ministry of Finance is criticised for inadequate follow-up of the Norwegian central bank, Norges Bank, as regards agreements with external managers,” he said.

He was “highly critical of the fact that Norges Bank signed a contract for profit-dependent external manager’s fees without a maximum limit”.

His report went on to say that “one manager received fees in the order of NOK500 million ($81 million) following re-negotiation of the agreement”.

The original agreement would have meant a fee of about NOK900 million ($145 million).

This was “so large, both in terms of the amount and percentage”, Kosmo said, “that the signed agreement must be deemed to warrant criticism”.

In response to these criticisms, Singsaas said that fee-caps would be considered. “Whether one should introduce a general rule for all fees is a question that will be considered.

“The basis for such an assessment must be what best protects both the fund’s financial interests and the fund’s reputation,” she said.

Leave a Comment

Sort content by

California dreamin’ of responsible funding

Relief for Californian state fund investment chiefs, their bosses and their members – with CalSTRS and CalPERS both returning 20+ per cent for the financial year – has been usurped by a reminder to politicians that the funds cannot invest their way to good health and a responsible funding strategy is required. mrec4inarticleinline Sponsored Content

Manager selection a fortunate choice

Whether it involves skill, good judgment or just plain luck, choosing the right manager is never an exact science but recently published research reveals institutional investors can make better decisions by avoiding conventional wisdom around past performance.mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3

Service providers key to ESG development

There is nothing like a bit of red-hot competition to get the blood pumping – 37 Principle for Responsible Investment (PRI) signatories are running for only six positions on the newly-structured PRI Advisory Council. Let’s hope this has the effect of actually transforming institutional investment portfolios, not just getting these responsible types a little spirited.mrec4inarticleinline

CalPERS looks for emerging private equity managers

Domestic emerging managers are the latest focus in the private equity portfolio of the $239 billion CalPERS, with the fund searching for a new investment vehicle, most likely a customised fund-of-funds, to invest in partnerships that may be under-capitalised.mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3

Managers refine glidepaths for a smoother ride

Managers are continuing to refine their strategies for target date funds, with more than a third of managers incorporating a tactical overlay into their asset allocation, a recent survey has revealed.mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3

Nasty surprises on the rise for investors, says ESG expert

Corporate disasters such as the BP Gulf of Mexico oil spill and the Fukushima nuclear disaster will be more prevalent and pose a greater risk to investors unless they act to comprehensively change the way they invest, a sustainability expert has warned.mrec4inarticleinline Sponsored Content scnative1 scnative2 scnative3

Previous