Source: Smart Investor
Those who move forward amidst the storms must first 'tie themselves to the mast.'
In an era of ongoing global turbulence and the overwhelming waves of technological change, what allows long-term investors to stay grounded? Nicolai Tangen, during a recent exchange at Oxford University, used this phrase as a footnote to his adherence to strategy and discipline.
Nicolai Tangen is the CEO of Norges Bank Investment Management, the institution responsible for managing Norway's Government Pension Fund Global — the world's largest sovereign wealth fund with assets exceeding $1.9 trillion, invested across global markets.
Its investment decisions are profoundly influencing corporate behavior worldwide. However, its massive scale and investment tentacles intertwined with the global economy also make it hard to avoid the 'butterfly wings' of small disturbances, let alone the increasing frequency of major shocks.
Tangen stated that when markets experience sharp volatility, the fund automatically rebalances according to preset mechanisms: selling bonds and buying stocks. This is not due to judgment but because of rules.
It is this discipline that has enabled the fund to navigate countless uncertainties over the past three decades, achieving an annualized compound return of 6%–7%. Considering this is a generational pension fund, such compounding effects remain remarkable.
Tangen frankly remarked, "Suppose you had told me a year ago that within a year, these tariffs would be imposed, conflicts would arise here, and situations would deteriorate there, then asked me to adjust a portfolio including tech leaders, engineering firms, and consumer goods companies based on this information... The most likely outcome would be: very poor. Tactical judgments are extremely difficult."
Currently, 70% of the Norwegian central bank's sovereign wealth fund is allocated to equities, while 30% is in bonds, with minor allocations to real estate and renewable energy.
When the topic turned to AI, Tangen avoided framing it within the binary dichotomy of 'bubble' or 'revolution.' He pointed out that more attention should be given to the amplifying effect of technology on inequality. Countries and companies genuinely embracing AI are rapidly widening the gap.
Within Norges Bank Investment Management, this shift is already underway. One hundred percent of employees use large model tools, and 65% participate in code enhancement tasks. "Technology has now reached the core of the organization," he said.
However, from a broader perspective, AI's promised boost to productivity has yet to materialize fully. Tangen believes the watershed moment for transformation will come when 'AI agents' mature, marking the end of a vast array of monotonous, repetitive tasks and the beginning of unleashed creativity.
It is worth mentioning in particular that Nikola Tangen believes asset management is an industry based on apprenticeship. “No one will entrust their money to someone who lacks training, a proven track record, or credibility. You need to first accumulate experience and build trust within an established system, avoid starting your own business too early, and learn as much as possible.”
I completely agree. This may also be the advantage of human compounding in the AI era, especially when it comes to credibility.
01, From Being a Generalist to a Career in Finance
Host: Mr. Tangen, your career path, for someone who would go on to lead the world’s largest sovereign wealth fund, is clearly not 'typical.' You received training in Russian and translation within the Norwegian intelligence system, studied finance at the Norwegian School of Economics and the Wharton School, and also pursued studies in art history and social psychology.
Given such a highly diverse background, could you take us back to the beginning and explain how you embarked on a career in finance? More importantly, what has been consistently driving and attracting you to investing?
Nikola Tangen: Generally speaking, why do people enter the financial industry? Because you want to make money.
I was born in a small town in Norway and developed an interest in making money at a very young age, finding it particularly fascinating.
At a very young age, I began working part-time in the securities brokerage department of a bank. I always had a dream of working in London, so I later started studying finance systematically, went to the United States for my education, and subsequently worked in London. That was the initial starting point.
So why finance? Why asset management? Because if you think carefully, investing might be the most interesting thing you can do.
You have to think about: Who makes the clothes we wear, the food we eat, the cars we drive, and the products we consume daily? You need to pay attention to new products, new technologies, study corporate management, understand organizational psychology, and consider geopolitics, defense, currency, and the macro environment. Virtually everything happening around us becomes part of your thought process.
Even if you deliberately design a 'game,' it would be hard to come up with something more exciting than investing. And if you do it well, you can also make money.
Of course, sometimes you don't do that well and still make money (laughter).
02. Asset management is an apprenticeship-based industry.
Host: Later, you chose to leave a relatively stable career path and founded AKO Capital. What prompted you to take this step? What was the biggest challenge in building a fund from scratch?
Nicolai Tangen: Before founding AKO, I worked at Egerton Capital, one of the earliest hedge funds in Europe. I learned a great deal there, received systematic training, and worked alongside a group of highly talented individuals.
The company was founded by John Armit and Bill Bollinger, who had a significant impact on me.
Later, I briefly left finance to study art history, but soon realized that I might be better at analyzing stocks than looking at paintings. So I ended my art history studies and decided to start my own company.
What is the biggest challenge in starting from scratch? It’s not actually setting up the company, but whether people are willing to entrust their money to you.
Starting an asset management company isn’t difficult; what’s truly challenging is convincing others to hand over their money for you to manage on their behalf. This requires trust, and trust is the hardest thing to build.
Today, this is even more difficult than when I started my business.
Many of you Oxford students may consider starting your own businesses in the coming years. If I were to offer one piece of advice, it would be that asset management is an apprenticeship-driven field. You must first learn from others; it is impossible to start managing assets independently right after graduation.
No one will entrust their money to someone without training, a track record, or credibility. You need to accumulate experience and build trust within an established system before venturing out on your own—don't rush into entrepreneurship too early, and try to learn as much as possible.
Many successful entrepreneurs only embark on their ventures when they are close to their late thirties. I was about thirty-six or thirty-seven when I started, David Rubenstein founded The Carlyle Group at a similar age, and Reed Hastings launched Netflix in his forties.
You don’t have to rush—you have plenty of time. What’s interesting, though, is that when you’re twenty, a year feels like a significant portion of your life; but by the time you’re fifty, a year seems like just a small fraction. Your perception of time quietly shifts during this process.
Host: Later, you underwent another major transition, leaving AKO to become the CEO of Norway's sovereign wealth fund. This meant selling or even relinquishing the company you had built yourself—a decision that is not easy for any founder.
Nicolai Tangen: In fact, I donated the company to a charitable foundation at no cost. I had already managed that hedge fund for fifteen years, and the learning curve was beginning to flatten. It felt like the right time to pass the company on to the next generation.
At that stage, I had even begun reapplying to universities because I always believed that university might be the best place in the world.
It was precisely around that time that this job opportunity arose.
For me, it combined three things I truly believe in: first, asset management; second, continuing to build and develop an organization—I had recently undergone systematic training in organizational development; third, doing something meaningful for a country.
03. The Design Mechanism of the Norwegian Central Bank Sovereign Fund
Moderator: In the late 1990s, Norway decided to channel its oil revenues into the Government Pension Fund Global to stabilize economic fluctuations and prepare for a 'post-oil era.' This institutional design differs significantly from the choices made by many resource-dependent countries.
From your perspective, how critical has this structure been to Norway's economic stability over the past few decades? What role has it played in shaping the country’s long-term resilience?
Nikolai Tangen: After the discovery of oil in 1969, Norway decided to establish this fund.
I believe the political decision-makers at that time did an exceptionally good job. First, they chose to save for a 'rainy day.' In many countries, the absence of a similar fund often leads to problems such as corruption and resource misallocation. This fund has played a crucial role in building Norway’s welfare state.
Currently, Norway has a clear spending rule that limits government use of the fund to no more than 3% of its total value annually. This portion now accounts for over 20% of the national budget, underscoring the fund's undeniable importance to the country.
Beyond that, several other factors are equally critical. One of them is the broad and stable political consensus.
Changes in government do not alter the fund’s investment philosophy. The Ministry of Finance provides us with a very clear and binding mandate, specifying how we should invest, which is essential.
Moderator: The spending rule you mentioned earlier is highly significant, and transparency is another hallmark of this fund. You are regarded as one of the most transparent sovereign wealth funds globally.
Could you please elaborate more systematically on your investment philosophy? What does this clear mandate from the Ministry of Finance specifically entail? In practical terms, when evaluating whether to invest in a company, what guiding principles and decision-making logic do you apply?
Nikolai Tangen: Overall, we are an index-like fund. Our asset allocation is roughly 70% equities and 30% bonds. Within the bond portion, we also include real estate investments and renewable energy infrastructure investments.
Moreover, the authorization document also sets forth clear stipulations regarding the allocation ratios for countries and regions.
I consider this point highly significant. When a fund occupies such a pivotal position in a single country, it is imperative to establish clear boundaries for the losses management can endure.
In a sense, you need to 'tie yourself to the mast.'
That is precisely what we have done. During periods of significant market volatility, we have pre-established rebalancing rules in place, which dictate selling a portion of bonds and buying stocks when markets experience sharp declines.
Automating this process to a certain extent is crucial for long-term investment.
04, Highly Long-Term Oriented Investors
Host: What about the investment philosophy itself? As CEO, when an investment decision is presented to you, how do you proceed? Which industries or sectors do you focus on, and how do you determine the investment direction?
Nicola Tangen: First, it is important to clarify that I personally do not make direct investment decisions.
This is a highly specialized and complex task that must be carried out by a dedicated, full-time team. Therefore, we divide our capital into different investment mandates.
A significant portion of these allocations are close to index-based configurations, with some strategic adjustments layered on top.
In addition, we have established industry teams, such as those covering pharmaceuticals, industrials, hardware, software, and other sectors. These teams operate around their respective benchmark indices, striving to achieve excess returns while maintaining manageable risks.
Host: From the current perspective, which industries or regions stand out in performance? AI is a topic we've already discussed and will delve into further later. But beyond that, which industries, countries, or regions are currently the fund's primary focus?
Nikola Tangen The financial sector, particularly the banking segment, has demonstrated remarkable performance recently. This can be attributed to shifts in the interest rate curve as well asMergers and acquisitionsthe recovery in activity, with these factors collectively providing support for the financial industry.
Of course, we have also experienced phases where the AI and technology sectors performed exceptionally well. However, these phenomena are inherently cyclical, often occurring in waves.
Host: Your support for emission reduction commitments also urges energy companies to accelerate their transition. However, some criticize that there may be a certain 'contradiction'—the fund itself originates from oil and gas revenues but calls for decarbonization. Can a fund backed by oil wealth still maintain credibility on decarbonization issues? What is your view?
Nicolai Tangen: In my opinion, there is no contradiction here.
Developing one’s own natural resources is neither immoral nor wrong; Norway indeed did so. The real question lies in how the resulting wealth should be invested and utilized.
We invest globally, holding approximately 1.5% of the world's publicly listed companies. At this scale, climate and pollution issues carry systemic significance for us.
If a company within our portfolio generates pollution, the externalities will ultimately affect other companies. For this reason, we must approach these issues from a perspective different from that of individual companies.
The second reason is that we are a highly long-term-oriented investor. From this standpoint, climate risk is fundamentally financial risk.
We can already see its real-world impact, from commodities like coffee and cocoa to beef prices. Climate change is becoming a latent inflationary force. And all else being equal, this is not favorable for financial markets.
Moreover, it is exacerbating inequality. Many countries still in the development stage are precisely the groups most vulnerable and first to bear the brunt of climate change impacts.
05. The Fund's 'Constructive' Strategy
Host: Has the fund taken specific actions in this regard? Can it be described as a form of 'activism'?
Nicolai Tangen: I wouldn’t define us as radical activists, but we do engage in constructive dialogue with companies.
We have clear expectations for companies on climate issues. For instance, we advocate that companies establish a clear 'net-zero emissions' pathway and follow up through ongoing communication.
Host: Earlier in 2025, the fund voted against Tesla CEO Elon Musk’s compensation package, drawing widespread attention. You have previously stated that the escalation of executive pay has reached an extreme, with shareholders ultimately bearing the cost.
In your view, what is the core issue with these mega-sized compensation packages? Do long-term investors have a responsibility to counterbalance this trend?
Nicolai Tangen: The most important point for us is whether management compensation is truly aligned with shareholder interests.
Compensation should be tied to performance, primarily in the form of equity, and gradually vested over a longer period. At the same time, the dilutive effect must also be fully considered.
We can accept it as long as the compensation structure is fair, transparent, and aligned with the long-term interests of shareholders.
Host: When it comes to issues involving war or severe human rights violations, how does the fund typically make exclusion decisions?
Nikolai Tangen: Within Norway's institutional framework, the owner of this fund is the people of Norway.
The parliament assumes oversight responsibilities, the Ministry of Finance manages day-to-day operations, and delegates specific execution to the central bank, where we operate within the central banking system.
Additionally, there is an independent ethics committee dedicated to making judgments on ethical standards. For instance, we do not invest in coal, and we have clear investment restrictions in areas such as weapons.
Earlier this year, policymakers decided to reassess this mechanism. A committee has been established to comprehensively review the relevant processes, and it is expected to clarify the future direction within one to two years.
06. Approaches to Uncertain Environments
Host: We are currently in a highly uncertain and continuously turbulent global environment. How does the Norwegian Sovereign Wealth Fund address this uncertainty? From your perspective, what are the key geopolitical changes that long-term investors need to focus on and strategically prepare for?
Nikolai Tangen: We indeed see many changes, and these changes are all significant. Over the past few years, the relationship between the United States and China has been evolving, as has the relationship between the United States and Europe. The relationships between almost all major powers are undergoing continuous adjustments.
The overall landscape is still evolving, and we do not fully know where it will ultimately lead.
So, as an investor, how should one respond? The answer is actually quite simple: first, ensure sufficient diversification; second, maintain a long-term perspective. This is precisely what we have consistently been doing.
Host: Are there any more specific approaches to consider?
Nicolas Tangen: We do not make investment decisions based on geopolitical factors, nor do we engage in tactical asset allocation.
The reason is simple: if you had told me a year ago that the world would be in its current state today, I would have expected markets to decline by at least 25%. However, contrary to expectations, markets have instead risen by 15% to 20%.
The resilience demonstrated by the markets far exceeds intuitive judgment. Moreover, geopolitical changes occur too rapidly for anyone to adjust a fund of such enormous scale around these shifts.
You must establish a clear framework of mandates and adhere to these rules over the long term. In most cases, this approach yields acceptable results.
In fact, over the past 30 years, the fund’s annualized compound return has been approximately 6% to 7%, slightly higher than the overall financial market performance.
Host: So, are you suggesting that geopolitics is not a core factor in your investment strategy? Compared to political environments, do you place greater emphasis on the companies themselves?
Nicolas Tangen: Yes, I don’t believe I can outperform in this area.
Suppose you had told me a year ago that within a year, tariffs would arise, conflicts would erupt here, and tensions would escalate there. Then, based on this information, I were to adjust a portfolio comprising tech giants, engineering firms, and consumer goods companies... The most likely outcome would simply be: disastrous.
Tactical judgment is indeed extremely challenging.
AI is reshaping the social structure.
Host: You once mentioned that you hope to achieve approximately a 10% efficiency improvement annually through AI, but the impact of AI on the overall investment environment is evidently much broader. Some people are concerned that we might be in the early stages of a situation similar to the Internet bubble around 2000, while others believe this represents a profound technological disruption that will unleash tremendous creativity, transform industries, and lead to higher growth.
Considering your need to preserve wealth across multiple generations, how do you generally view AI's impact on industries?
Nikola Tangen: Before delving into specific details, let me say that we could easily spend several hours discussing this topic. It is arguably one of the most fascinating subjects at the moment, yet it also raises a series of highly significant questions.
First, what does it mean for society? It will likely widen the gap between those who 'have' and those who 'do not have.' If you lack infrastructure, knowledge, or the ability to utilize new technologies, you will be left behind. Highly educated individuals tend to benefit more than those with lower levels of education.
This will not only exacerbate inequality within societies but also widen the gap between nations.
We have already seen some countries making comprehensive bets on AI. For instance, Denmark moved very early, Sweden has been advancing systematically and methodically, and Iceland has just reached a nationwide collaboration agreement with a technology company.
These changes are reshaping the social structure and altering relationships between countries.
The same applies at the corporate level. Companies that fully embrace AI and actively advance are rapidly widening the gap with those that have not taken action.
Within a typical enterprise, you often see this structure: one-third are early adopters who perform exceptionally well; one-third are following along; and another third are simply unable to keep up.
This has profound implications for both employees and management. We are seeing this change almost everywhere, and its consequences are highly significant.
So if I were to give you one piece of advice, it would be that you must keep up, give it your all, use it every day, and strive to stay at the forefront. Otherwise, your ability to make an impact will be significantly diminished.
Over the past few months, society has begun to witness very specific changes, such as large consulting firms reducing recruitment and freezing salaries for new hires. These are not abstract discussions but realities happening every day.
So after this event concludes, you can return to the library to continue studying AI, or go grab a beer, or do both.
Host: When you say 'focus on AI and stay ahead,' what more specific advice would you give to newcomers joining your company? Because everyone says to learn AI, but what can students actually do?
Nikola Tangen: First, if you are not proficient in this area, you won't be able to join our company in the future—this is the first point.
Second, the sources of recruitment are changing. We are increasingly favoring individuals with some technical background. Regardless of your major, you must possess a basic understanding of technology and truly get on board.
Internally, AI-related training is mandatory. To date, we have achieved nearly 100% adoption of large language model tools among our employees. We use Claude, and it is essentially a daily tool for us. Additionally, about 65% of our employees are using code-enhancement tools like Cursor.
You can imagine what this means. With tools like Cursor and various coding aids available, 65% of our workforce is already engaged in code-related work, which is astonishing in itself.
Looking back a few years, IT departments were often relegated to the corner, almost as if stuffed into storage cabinets, with many people feeling like they were 'second-class citizens.' Now, things are completely different—they've become heroes.
Then there are those young individuals who have just joined graduate programs. In the past, many would consider them somewhat 'troublesome,' since it took three years of training before they could truly be useful; now, many can start making real contributions within 30 minutes.
In just a few short years, technology has moved to the center of organizations, and the roles of young people in companies have fundamentally changed. All of this is happening quickly and is fascinating—I thoroughly enjoy this transformation.
Host: That’s the change at the corporate level. But from a broader perspective, how do you think AI will transform future work, employment, and even broader social structures?
Nikolai Tangen: This is actually a very difficult question to answer. So far, AI has not significantly boosted productivity across society as a whole, but I believe it will—it just hasn’t fully happened yet.
The reason is that what we currently have is AI, but not truly 'agent-based AI.' And unemployment issues will begin to emerge during this phase.
Indeed, some jobs will disappear, while new ones will be created, but there is no doubt that it will alter how society operates.
However, one thing I believe is certain: a large number of boring jobs will be eliminated. We shouldn’t be doing those tedious tasks anymore anyway.
Humanoid robots will begin to emerge in large numbers in the coming years.
Host: After AI, what comes next?
Nikola Tangen: Robots, especially humanoid robots, will emerge within the next few years, and we won't have to wait too long.
You will see them gradually enter daily life starting from next year, year after year. They will handle all the less interesting tasks for you, such as washing dishes, doing laundry, making coffee, mopping the floor... everything you don’t particularly want to do will be completed by them.
Moreover, you won’t need just one. You’ll want them everywhere. This could be one of the few things that people are willing to take out a bank loan to buy, much like when they purchased cars. Because owning a car is incredibly convenient, similarly, owning a humanoid robot will feel very worthwhile.
By the way, have you ever wondered why these robots look so human-like?
I hadn’t thought about it either, until someone pointed it out to me. The reason is actually quite simple: this world is designed for humans. Stairs, doorknobs, washing machines, dishwashers, ironing boards... almost everything is built around the structure of the human body.
Therefore, designing robots in human form is inherently the optimal solution. Creating something “human-like” makes it easier to integrate into this world.
I find this quite fascinating. Have any of you thought about it before? I hadn’t.
Host: We would also like to ask, in which industries has AI already made the most significant impact? Especially in the financial sector, has it influenced investment philosophies and strategies? To what extent are you utilizing it?
Nikola Tangen: AI will undoubtedly replace a large number of so-called 'white-collar jobs.'
If you’re an accountant, lawyer, or similar professional, it can make your work more efficient. In the asset management industry, it will bring significant changes as well, such as helping us reduce transaction costs and aiding in analytical work.
Of course, there are already numerous investment strategies in the market based on algorithms and models. We do not fully understand how much of the current market is driven by these systems, but it is certain that they account for a significant proportion.
Host: On a personal level, you are also highly engaged in the fields of charity and education. From a personal perspective, rather than as an investor, what do you think about AI’s impact on inequality?
Nikolai Tangen: One thing is very clear: if used correctly and reasonably, AI is an extraordinary tool. This is because it means that, to a large extent, knowledge has become free.
In the past, you had to pay for knowledge and expertise; if these tools can be made accessible to everyone, it may enhance the capabilities of a segment of society.
But is this happening on a large scale now? I don’t believe so. However, many philanthropists have indeed been working hard to promote the widespread adoption of AI in education.
Host: The issue, however, is that even at the same price point, people in Western countries have access to computers and high-speed internet, whereas many developing nations lack the same infrastructure. Will this further widen the gap?
Nikolai Tangen: Of course, it will. In fact, you’ve already provided the answer within your question. If you have access to a computer and high-speed internet, you are already in a completely different position.
So, how many people globally are excluded by the premise of your question?
If used properly, it is an excellent tool; if misused, it will amplify differences both within societies and across the globe.
Host: Should governments take measures to ensure that AI helps narrow, rather than widen, inequality?
Nikola Tangen: I believe it is very difficult for the government to legislate to solve this issue. This has entered the political realm, involving how redistribution is carried out within a country, which goes beyond my area of responsibility.
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