Oh boy, have we been lucky. Oil was found in one of the last drills in 1969.

Forward-thinking politicians acted such that the Norwegian people were the ones who benefited, not only our generation but also generations to come.

In 1990, just six years prior to the first inflow, the Norwegian parliament adopted an act that established the Norwegian Government Petroleum Fund, as it was called at that time.

So, the timing was quite excellent; when the money started to flow in, the organization was already set up, ready to invest.

Since then, our goal has been to maximize, or give the highest possible return for a moderate risk.

Almost 5 billion kroner has been added to the fund since the beginning.

That is the flow of money saved from the revenues of Norwegian oil and gas production.

However, most of the fund's value comes from returns; since the first inflow in 1996, the fund has generated a return of 14,000 billion kroner, including a currency effect of 3,000 billion.

The return accounts for 75% of the fund's value, including currency effects.

That is fascinating.

To protect the Norwegian mainland economy, the fund is only invested outside of Norway.

So, the investments are divided primarily between North America, Europe, and Asia Oceania.

72% of the fund is invested in equities, 26% in fixed income, and 2% in real estate.

We have an automatic rule that makes us sell down or reduce equities when the market increases, and buy equities when they decline, to keep the equity portion around 70%.

Most fixed-income assets are in developed markets, with a large percentage in treasury bonds issued in euros, dollars, pounds, and yen.

We also invest in close to 900 properties in several global cities, including offices, retail, and logistics sectors in London, Paris, Berlin, New York, Boston, San Francisco, and Tokyo.

The fund is also invested in almost 9,000 companies across, I think, 71 countries, all listed equities.

On average, the fund owns 1.5% of all listed companies, making it one of the world's largest single owners of companies, which is quite fascinating.

Equity management is based on two main strategies: market exposure and security selection based on fundamental research.

These strategies enable us to achieve exposure to the broad equity market, as expressed in the equity benchmark, while simultaneously increasing returns based on company analysis and security selection.

In London, New York, and Singapore, we organize global sector teams focusing on emerging markets and small-cap companies in Asia.

All of them are country-focused and based in the respective countries, for example, focusing on India, Brazil, Japan small-cap, and Korea small-cap.

In Europe and the US, it's a bit more mixed, with both locally based, country-focused small managers and some regional and sector managers.

The key is that we look for specialists who know a few areas very well.

Today, we have 110 managers in 50 different cities across the world.

We strongly believe in the information advantage of being on the ground.

We seek to build portfolios grounded in their extensive local knowledge and research.

They maintain regular communication with the companies in the portfolios by frequently visiting them on-site, rather than just attending conferences.

Our aim is to generate excess return.

As of last year, we have generated an annualized excess return of 1.8% after fees since the beginning, which amounts to 90 billion kroner.

Over time, we have only paid 3% in fees, meaning 80% of the excess return is kept by us.

We also believe that external managers reduce the risk of over-investments by avoiding certain companies with problematic business models and weak corporate governance in these markets.

These managers operate in markets with higher exposure risk.

Our focus on ESG issues is integrated into the selection and monitoring process.

For example, after selecting a manager, we send expectation documents to them and discuss ESG issues to ensure they understand what is important to us and keep it in mind when investing on our behalf.

Local managers have actually avoided 75% of the companies in their local benchmarks.

Our strategy has evolved over time with the expansion of the fund's universe, its size, and changes in the market environment.

Our approach has always been dynamic, and the segments we choose to focus on have changed, such as a small-cap focus in 2000, and regional managers in 2005.

This involves a great deal of uncertainty that may be better assessed through additional research.

We expect changes to continue going forward, as we know there will be changes in opportunities.

What has not changed is that all our mandates are based on deep fundamental research, and they are all on segregated accounts.

That means they are trading on our books in our name.

There are several reasons why we do that.

First, we see at all times what they buy and sell, so we know the risk of each of the portfolios, the holdings, changes, and their combination.

If anything, there is absolutely no doubt who owns the assets because they are trading on our book.

You may have seen the movie Moneyball, with Brad Pitt as Billy Beane, who builds a team of baseball players for the Oakland A's because they can't compete on salary.

We follow a similar process.

We don't look at hiring managers based on their past performance because we believe expected performance will be good, not necessarily that they have had good performance historically.

Historical performance may hide certain factors, for example, whether good performance was driven by certain analysts who used to work in the team.

Furthermore, we need a long history to figure out if performance is driven by skill, and very frequently, we don't have that history.

Second, it's not an investment committee that decides which manager should be awarded a mandate, but an individual portfolio manager.

We have said that employing external managers is an investment decision, and investment decisions should not be made in group settings.

So, we have eight people in the team selecting managers, and each of us is a portfolio manager responsible for selection and termination.

Within each, there is one dedicated decision-maker for the mandate.

We don't use consultants to assist us, unlike many other clients.

We have decided to delve deep to know every aspect of the manager's portfolio philosophy and team interaction because we are striving to create a portfolio of different portfolio managers that fit well together, with different focuses and investment universes.

So, what do we do? We follow a quite structured selection process.

It starts with a short questionnaire to potential managers, asking about their organization, teams, full portfolio, and main competitors.

This information helps us gain better insight into additional managers.

Based on that, we have a huge dataset of potential managers and can perform different analyses on their actual portfolios, changes in what they've been buying, and differences between each.

This leads to a shortlist, and we can meet them on-site.

Those selected for the second and third rounds undergo more extensive operational due diligence, meeting our team three to five times before selection.

Several are screened out during these meetings, while new managers are found and included in the search.

Each time we have these meetings, we conduct a lot more analysis on portfolio changes and potential team changes.

This process is repeated continuously.

For all potential managers we invest with, we usually meet them three to four times before selection and once per quarter after they are selected.

In these meetings, we discuss the portfolio, individual companies, when they met the management of those companies, what they talked about, which ESG issues they discussed, what is priced into the company, and why they have a different view from the rest of the market.

This includes both companies they are invested in and companies they have decided to stay out of.

All meetings with these managers are conducted on-site; we never meet any managers in our offices.

There are several reasons for that.

First, we prefer the manager to focus on investments and the portfolio rather than traveling around the world to meet us.

Second, by seeing them on-site, we can meet the whole team, which is impossible if you drag them to Norway.

Third, when meeting managers in a country, we don't only meet the ones we currently have, but also all existing and potential managers, so we can compare their views on markets and companies.

This provides a very good understanding of the managers' different views: who thinks differently from the rest, who is early or late to investment ideas, who is engaged in hedging, etc.

When looking for managers in a certain market, we look for a good investment company and a good portfolio manager.

Experience shows that returns are often attributed to individuals, and they need organizational support.

We often find smaller, privately owned organizations generate higher excess returns than larger ones, especially those owned by financial institutions.

There are several reasons for this: more often, better alignment of interests between portfolio managers, analysts, and customers; compensation structures that reflect and strengthen this alignment; privately owned organizations are better at attracting, retaining, and growing talented teams; and they more frequently focus on generating returns rather than just gathering assets.

Different parts of financial experience involve personal responsibility and personality, leading to in-depth analysis.

Portfolio managers should have ownership of the final investment decision.

We avoid investment teams with rigid investment committees and look for organizations where we can find clear and individual-based decision-making.

Overconfidence in group settings, with a lack of quality and seeking unanimity, should be avoided in investment decisions.

It is very important that the portfolio manager has a strong team around him or her to give input on stocks to buy and stocks that he or she should have sold.

In general, the team should give them a hard time to help them avoid anchoring bias, loss aversion bias, and other behavioral traps.

For example, one manager in Japan has a 'war room' where views from the team are aired out and opinions are expressed independently.

In general, we seek to identify an investment culture that is embedded at all levels, preferring hands-on, active investors.

We are searching for such individuals, and given that we don't look at track records, we can look for good teams and good portfolio managers, unlike many other allocators out there.

We often find hungry teams focused on showing the world their large potential, confident that they will succeed given the long commitment.

With the managers we select, we have time to grow with them.

This requires quite deep diligence into why they started the business and their passion for investing, compared to just building an organization and team, giving them input and discussions.

The types of decision-makers and portfolio managers we have chosen to invest with are quite diverse, but there are some common characteristics among them.

They need to have a creative and distinct view of the world, where they seek different data, different interpretations, and can put the numbers into context.

It's essential to be curious, challenge conventional wisdom, be inquisitive, and humble.

They need to be willing to always look for new information and willing to change one's mind.

One portfolio manager sat on road cars for a week before investing.

Another sat in a wheelchair, traveling around the world to make up his own view.

In general, they need to find information through their own analysis of the market and companies.

At a time when changing market dynamics can lead to disruption, the only information to stay away from is inside information.

One portfolio manager with golf clubs in the office claimed that the best information he got was on the golf course.

That was one of the shortest meetings I ever had.

The external managers apply huge analytical capacity to a limited number of equities.

They seek to identify companies with attractive valuations and positive ESG progress, and these convictions should be reflected in the portfolio.

We seek concentrated portfolios.

We believe we have selected the best portfolio manager in that specific field, and we expect them to take high market risk to outperform the group.

The group responsible for selection, termination, and ongoing return and risk involves many more of us who are involved in monitoring governance, compliance, internal legal advisers, risk management and measurement, operations, and internal and external auditors who regularly review everything.

But focusing more on what we do, given that all our mandates are on segregated accounts, we have daily access to all holdings and changes in the portfolio through a database.

We use several monitoring tools on this data, which is crucial for monitoring each manager's performance, risk, trading, and holdings.

For example, trading analysis involves examining when managers buy and sell stocks in combination with performance and broker estimates.

This is put into context through discussions with the managers to evaluate if they are executing their strategies and philosophies.

Is the portfolio manager a momentum player? When is he or she increasing a position? Are they utilizing market volatility to trade the position? Are they willing to revise their investment thesis and change the portfolio?

Stale portfolios are a red flag and something we would investigate further.

Markets change quite drastically, and we expect our managers to adjust their portfolios.

Furthermore, this database stretches back to 1998, which gives us a huge dataset on when and how they underperform or outperform, and how we should think about combining managers, increasing funding, terminating mandates, etc.

So, our focus is to optimize portfolio managers based on our knowledge of the portfolio, regular meetings with managers, and analysis of the portfolios.

The aim is to maximize expected return per dollar of fee.

An additional manager may bring excess performance but may also bring us closer to an indexed portfolio, which is just an expensive way of doing it.

We manage the portfolio quite actively.

On average, we have 14 new managers and 10 terminations every year.

40% of terminations are due to significant changes around the portfolio manager, such as them leaving or expanding coverage.

Another 40% is due to wrong selection on our part or us being less convinced about their future excess performance for some reason.

20% is due to shifting strategy, such as moving out of sector managers or regional managers.

The shortest mandate we had was two weeks—that was a portfolio manager who left right after signing the agreement.

The longest is a UK small-cap mandate we've had since 2001.

On average, we hold mandates for a bit over 4 years, and the average holding of today's mandates is between 6 and 7 years.

So, we use experts in selected market segments, utilizing deep fundamental research.

We prefer small and privately owned organizations, and prefer single portfolio managers versus team-run portfolios or investment committees.

We meet the whole organization on-site.

We look for specific characteristics in managers and their teams during the monitoring process.