4 investing principles that elevated Yngve Slyngstad to managing the NBIM
Yngve Slyngstad is a renowned investor who transformed the Government Pension Fund Global into the largest sovereign wealth fund globally. He advocates for long-term investing, diversification, active ownership, and transparency.
How many of us have heard of Yngve Slyngstad, a name synonymous with finance? Being the CEO of Norges Bank Investment Management (NBIM) from 2008 to 2020, he successfully expanded the Government Pension Fund Global in Norway, transforming it into the largest sovereign wealth fund globally, with assets under management surpassing $1 trillion. Additionally, he is recognised for spearheading responsible investment initiatives, including the strategic divestment from companies with subpar environmental and social performance.
Slyngstad is regarded as one of the most influential investors globally within financial circles. His advocacy for a socially responsible approach to asset management has led numerous investment professionals to increasingly view Norway as a benchmark for financial asset management. While the principles articulated by this accomplished investor may not be universally applicable, they remain noteworthy. Some of these include
Have a long-term orientation
Investors are encouraged to adopt a prolonged perspective and concentrate on the intrinsic value of assets, prioritising it over transient market fluctuations. Embracing this enduring outlook is crucial for attaining sustained success in investments.
When investors concentrate on the near future, they are prone to making impulsive decisions influenced by market noise and emotions. This tendency can result in suboptimal investment decisions, such as hasty selling during market downturns or acquiring overvalued assets amidst market upswings.
Crucially, investors adopting a long-term perspective are better equipped to withstand market fluctuations and emphasise the sustained growth potential of their investments. This strategy is more inclined to yield positive returns over an extended period.
Diversify slowly
Diversification stands as a crucial tenet in investment strategy. By distributing investments across diverse asset classes, geographical regions, and sectors, you can mitigate overall risk and enhance the likelihood of attaining long-term financial objectives.
Initial efforts are best directed toward constructing a diversified portfolio. Additionally, if substantial portfolio adjustments are on the horizon, it’s advisable to implement them gradually over time or in a counter-cyclical manner.
Volatility gauges the extent of price fluctuations in an asset or market segment. Incorporating diversification into your portfolio can effectively lessen volatility, contributing to a more comfortable investment experience.
Seek transparency in investing decisions
Highlighting transparency is praiseworthy, as it corresponds with the principles of good governance and investor protection. Fund managers bear the responsibility of providing clear and succinct explanations of their fund’s investment strategy and risk management practices, ultimately promoting trust and accountability among stakeholders.
Investors can base informed decisions on whether to invest or not only when there is ample transparency, effectively reducing information asymmetry and guarding against uninformed choices.
Consider ESG factors when investing
The influence of ESG factors on investment portfolios remains a topic of discussion, with evidence supporting both positive and negative impacts. Although the integration of ESG considerations may contribute to enhanced financial performance, there are perspectives suggesting that these factors might exert minimal or no influence on returns.
Effective ESG practices can contribute to improved risk management, potentially leading to lower volatility and more stable returns. Moreover, the inclusion of ESG considerations in investment decisions can align them with broader societal goals, potentially creating opportunities for more sustainable long-term growth.
Slyngstad’s leadership of the Government Pension Fund Global (GPFG), the largest sovereign wealth fund globally, has been truly commendable. His steadfast dedication to long-term investing, diversification, active ownership, and transparency has turned the GPFG into an exemplar of responsible investing practices, establishing a noteworthy benchmark for institutional investors across the globe.
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First Published:20 Nov 2023, 12:19 PM IST
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