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Financial Happenings Blog
Tuesday, February 09 2010

Norway's sovereign wealth funds are well known to have a successful track record and are amongst the largest sovereign wealth management funds in the world.

The Economist magazine has reported an interesting debate playing out with regards the Norwegian Government Pension Fund - Norway's pension fund: Passive aggressive.

The debate has come about following a review ordered by the Norwegian government after poor performance returns through the economic crisis.  The government called on feedback from Mercer, a consultancy, and a report by three business-school academics?Andrew Ang, William Goetzmann and Stephen Schaefer from Columbia, Yale and London respectively.

The 3 academics found that "for all their stock-picking and do-gooding, the fund's managers could just as well have thrown darts at a board.  Taking the crash into account, the fund's performance was essentially indistinguishable from that of a passively managed index fund. "The evidence points to the fact that over time, managers do not provide extra profits,"

The fund's managers have fired back with a 96-page rebuttal of passive investing with the Norwegian parliament to debate the issue in the European Spring.

Yet again there appears to be evidence that the active management approach does not provide superior performance that cannot simply be explained as luck or chance rather than skill.

For me the debate provides further evidence to question the appropriateness of an active management approach and shows the 3 factor model asset class investing approach built around index style funds stands up well.

Scott Keefer

Posted by: Scott Keefer AT 11:16 am   |  Permalink   |  Email
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