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4 investing principles that elevated Yngve Slyngstad to managing the NBIM


How many of us have heard of Yngve Slyngstad, a name synonymous with finance? As CEO of Norges Bank Investment Management (NBIM) from 2008 to 2020, he successfully expanded the World Government Pension Fund in Norway, transforming it into the largest sovereign wealth fund in the world, with assets being management exceeding $1 trillion. In addition, he is recognized for leading responsible investment initiatives, including strategic divestment from companies with below-par environmental and social performance.

Slyngstad is regarded as one of the most influential investors in the world within financial circles. Because of its support for a socially responsible approach to asset management, many investment professionals are increasingly looking to Norway as a benchmark for financial asset management. Although the principles expressed by this great investor may not be universal, they are worth a lot. Some of these include

Have a long-term orientation

Investors are encouraged to take a long view and focus on the intrinsic value of assets, prioritizing it over transient market fluctuations. Adopting this permanent attitude is critical to achieving lasting success in investments.

When investors focus on the near future, they are likely to make impulsive decisions influenced by market noise and sentiment. This bias can lead to suboptimal investment decisions, such as selling quickly during a market downturn or acquiring overvalued assets amid market volatility.

Crucially, investors who take a long-term perspective are better able to withstand market fluctuations and emphasize the sustainable growth potential of their investments. This strategy has a greater tendency to yield positive results over a long period of time.

Diversify slowly

Diversification stands as a vital principle in the investment strategy. By spreading investments across different asset classes, geographic regions and sectors, you can mitigate overall risk and increase the likelihood of achieving long-term financial objectives.

It is best to focus initial efforts on building a diversified portfolio. Furthermore, if significant portfolio adjustments are forthcoming, it is recommended that they be implemented gradually over time or in a counter-cyclical manner.

Volatility measures the amount of price fluctuations in an asset or market segment. Adding diversification to your portfolio can effectively reduce volatility, making for a more comfortable investment experience.

Seek transparency in investment decisions

It is advisable to emphasize transparency, because it corresponds to the principles of good governance and investor protection. Fund managers have the responsibility to provide clear and concise explanations of their funds’ investment strategy and risk management practices, ultimately promoting trust and accountability among stakeholders.

Investors can only make informed decisions about investing or not investing when there is enough transparency, effectively reducing information asymmetry and protecting against ignorant choices.

Consider ESG factors when investing

The impact of ESG factors on investment portfolios is always a matter of debate, with evidence supporting both positive and negative impacts. While the integration of ESG considerations may contribute to improved financial performance, there are perspectives that suggest these factors may have minimal or no impact on results.

Effective ESG practices can contribute to better risk management, which can lead to lower volatility and more stable returns. In addition, incorporating GSF considerations into investment decisions can align them with broader societal goals, potentially creating opportunities for more sustainable long-term growth.

Slyngstad’s leadership of the Global Government Pension Fund (GPFG), the world’s largest sovereign wealth fund, is truly commendable. Its steadfast commitment to long-term investment, diversification, active ownership and transparency has made the GPFG a model of responsible investment practices, establishing a reputable benchmark for institutional investors around the globe.

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Updated: 20 November 2023, 12:19 PM IST

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