DET NORSKE OLJEFONDET VERSUS YALE UNIVERSITY

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White Paper No. 55: Yale Versus Norway

Every investor knows about Yale University and the extraordinary success of its endowment portfolio under the guidance of the redoubtable David Swensen. Indeed, many families have tried to emulate Yale’s approach to asset management, for obvious reasons. Yet, those families – and even most institutional investors who have tried to copy Yale – have failed. The reasons for these failures are many, but these are the main stumbling blocks: few investors have the huge asset base Yale boasts (about $20 billion); almost no one was as early into venture and buyouts investing as Yale; it’s a rare investor who can match the talent and dedication of Yale’s in-house investment staff or investment committee. But the main reason for the failures is far simpler: if you want Yale’s results, you need David Swensen to manage your assets.

By contrast, almost no one has heard of the Norway Government Pension Fund (NGPF). But here are a couple of facts about the NGPF. First, it’s now the largest sovereign wealth fund in the world - $580 billion at mid-2011. Compare this to the largest US pension fund, CalPERS, which has about $230 billion. Second, its investment track record is quite good, and Edwin Truman recently awarded the NGPF top position on his “scorecard,” ahead of 53 other sovereign wealth funds from 37 countries.4 Finally, and most important, it’s only a modest exaggeration to say that the NGPF is the “anti-Yale” in its investment approach.

We’re guessing that few of our readers have ever heard of the chief investment officer of this remarkable fund, the “David Swensen” of sovereign wealth funds. His name is Yngve Slyngstad, and he works for (are you sitting down?) a bank , specifically for the Norges Bank, Norway’s central bank based in Oslo.5 One important reason why no one has heard of Mr. Slyngstad is that Norway uses a team model,” rather than the “star” model embodied by David Swensen. This suggests that to th extent the Norway Model may be of interest to family investors, it ought to be a lot easier to imitate than the Yale Model.

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