Yngve Slyngstad runs the world’s biggest sovereign wealth fund and travels around China for a week once a year.
Understanding what’s poised to become the world’s largest economy is crucial for Slyngstad as he manages a fund that Norway predicts will reach $1 trillion in less than three years. He’ll be in China this month, visiting Beijing and other cities.
Growth in China is slowing and the lack of transparency is making it hard for investors to understand exactly why.
Slyngstad, who last year visited Shenzhen, Hangzhou and the Shandong province, is looking for investments to channel billions of dollars in Norway’s oil cash. He has been lobbying the Chinese government to allow the fund a bigger quota than the $1.5 billion it’s permitted to place in Chinese A shares.
Norges Bank Investment Management, which runs the fund as part the central bank, owned 1.3 percent of global stocks at the end of last year.
Figuring out how to invest in China is just one of many hurdles. Slyngstad said one of the main worries now is how monetary policy will affect his investment decisions. Continued turmoil in the EU and distortions in credit markets also cause concern.
Slyngstad said the fund is now “less invested in” credit markets after excess liquidity distorted prices. He’s adjusting the portfolio even after corporate bonds were the fund’s best performing asset class in the third quarter.
The financial crisis — during which the fund has bought up cheap securities everyone else was selling — has challenged truths about investment, monetary policy, the economy and the financial markets, he said. It has showed that the financial industry has the capacity to heal itself, with or without the help of regulators, according to Slyngstad.
The power of the crisis could be called “Schumpeterian creative destruction,” said Slyngstad, who has studied German philosophy. “Crisis within the financial sector also serves a purpose,” he said. “You have to be careful about something that without a crisis looks stable, but may also turn stagnant.”.
A discussion on broadening the asset mix of the fund is coming “no matter” what, and a tipping point could be when it has reached 4 percent in real estate, Slyngstad said. The fund has so far snapped up properties on Times Square in New York, the Avenue des Champs-Elysees in Paris, Regent Street in London as well as San Francisco, Washington and Zurich among other cities.
“That will be a natural touch point,” he said. “Both for the real estate question, and for the real assets question.”
