After the opening of its Shanghai office two years ago, Norges Bank Investment Management (NBIM) -- considered to be the world's second largest sovereign wealth fund -- says it is opening a second Asian investment office in Singapore.
NBIM manages the global investments of the Norwegian Government Pension Fund, the bulk of the Norwegian central bank's foreign exchange reserves and the country's Government Petroleum Insurance Fund. The disclosed value of just the pension portion of its managed assets totals NKr2.76 trillion ($453 billion). UAE's Abu Dhabi Investment Authority, the world's largest sovereign fund, boasts $627 billion.
NBIM's Singapore office will be its fourth overseas investment centre outside of Oslo. The office will officially open on June 30 with a ceremony expected to be attended by a who's who in the region, second only to CIC's recent Sanya party. In recent years, NBIM has also added offices in New York and London.
While the bulk of NBIM's portfolio is managed internally by its portfolio managers in a hands-off fashion that many liken to "mini hedge funds", the fund also outsources about 13% of its portfolio to external managers in markets and segments that it does not have internal expertise in or it considers too "specialist".
The new Singapore office will be charged with recruiting investment professionals to add to its internal expertise, researching investment and trading opportunities, conducting company visits at its investee companies, and potentially even adding a few names to its list of external managers.
Furthermore, it is also possible that NBIM will search for investment or voting partners in the region from Singapore. Canada Pension Plan's investment board co-invests with other big Asian pension funds such as Korea's National Pension Service and China's National Social Security Fund to demand better fees and spread risk.
15% of the NBIM's AUM is invested in the Asia-Pacific. Known managers in the region that have already been enlisted include Australia's Ellerston Capital, Malaysia's RHB Investment Management, Pheim Asset Management, Thailand's Ayudhya Fund Management and Singapore's Cephei Capital Management.
Up to the end of 2009, the fund has given out some NKr300 billion ($49 billion) worth of mandates. Just last year, it paid managers some $529 million worth of fees.
In Asia, it is open to considering external managers with expertise in: Japanese small caps; Japanese all caps; Greater China and Indian equities; and sector-based investments in renewable, alternative energy, clean tech, climate change, water or energy-themed investments. Mandate sizes will be between $50 and $250 million.
The Norges Bank will not consider, however, investments in non-listed equity, private equity, non-listed real estate, option strategies, SRI funds, top-down allocation funds, balanced strategies or convertibles.
NBIM's CEO Yngve Slyngstad is a firm believer in active management and, as one of the world's largest investors (it owns 1% of all outstanding global equity issues and has quietly amassed 0.75% of all equity issues in Asia Pacific), Slyngstad is also known to put pressure on investee companies to improve corporate governance.
Incredulously, the fund has voted in the shareholder meetings of 5,672 of the 5,943 stocks it owns in Asia. That works out to a voting rate of 95.4%. (In Europe, it voted in just 64.5% of the 2,258 companies it invests in.)
When voting, it has several key objectives in mind; from demanding equal treatment of shareholders and encouraging board accountability to issues of climate change, water management and children's rights.
Just last year, it pressed listed mineral miners in Hong Kong to provide transparent information on project assessments and environmental consequences. It also demanded equal treatment of shareholders in takeovers (such as, PCCW), pressed for greater independence in Japanese boards, and complained about the failure of introduce real and effective voting in Taiwanese companies.
There's no word of what it has managed to achieve with its activism in China to date, however.