This Sovereign Wealth Fund Terminates an Average of 11 Fund Mandates Every Year
Posted on 04/21/2020
Norges Bank Investment Management (NBIM) oversees Norway Government Pension Fund Global, the world’s largest sovereign wealth fund. NBIM recently issued a report detailing their inner workings with external fund managers. At the time of the report, NBIM says that 227 equity mandates have been terminated out of 308 mandates awarded since inception in 1998.
On average, since 1998, NBIM terminates 11 mandates every year. The biggest reason for the termination, measured by assets at 37% were shifts in strategies from regional, sector and environmental mandates to emerging markets and developed markets small-cap mandates. The 27% of terminated assets were from significant changes in relation to the portfolio manager, such as leaving their employer or expanding their coverage. Organization and team changes are watched by NBIM. Other reasons for termination include a lack of confidence in the manager, regardless of how long he or she has had a mandate. On record, NBIM terminated a mandate after two weeks of the portfolio manager leaving the company.
The report states “Similarly, if there are other changes to the team or organisation that make us less convinced that the expected excess return is the same as when we selected the manager – for example if an important specialist analyst is promoted to a generalist management role – we will terminate the mandate.”
NBIM requires the usage of separate accounts as termination is performed with same-day notice.