Norway's Giant Sovereign Wealth Fund Goes Full Tinfoil Fringe Blog

You know the world has gone mad when one of the world's largest pension funds, mired in its need for the maintenance of the status quo, begins to sound like 'digital dickweeds in their parents' basements'. Norway's massive $890 billion wealth fund has stepped out of the shadows to slam global central bankers for affecting "pricing in today’s market to such an extent that monetary policy itself has been a risk you have to watch;" and market structure, criticizing the proliferation of dark pools, "there’s a rent extraction from all these intermediaries... we’re in favor of trying to reduce the number of block-crossing venues," Schanke said, "one would probably be perfect."

 

Sounding a lot like a crazy fringe blog, Norway’s $890 billion wealth fund, as Bloomberg reports, is criticizing the two pillars of today's irrepressible stock market rally...

The investment risks stemming from monetary policy have never been greater...

Like most global investors, the Oslo-based fund is trying to navigate uncharted terrain as central banks across the world push out stimulus to protect economic growth and spur inflation.

 

“Monetary policy does affect pricing in today’s market to such an extent that monetary policy itself has been a risk you have to watch,” Yngve Slyngstad, chief executive officer of the fund, said in an interview on Wednesday at Bloomberg’s New York headquarters.

 

“Investors are focused more on monetary policy changes than has been generally the case, than at any time, as far as I can remember.”

 

At the end of last year, the fund was invested in bonds in 31 currencies.

 

“As anything that moves prices is a risk that has to be monitored, here the effects of monetary policy affect prices dramatically,” Slyngstad said. “It’s of course always been the case with long rates, and now more significantly with the currency. That’s just a fact of the current market.”

And is taking the rare step of publicly criticizing the proliferation of dark pools, arguing the world’s biggest investors only need one such platform.

“There’s a rent extraction from all these intermediaries,” Oeyvind Schanke, head of the fund’s asset strategies, said in a telephone interview on Friday. “We are trying to advocate that we need to bring some of this back to where we started by getting the participants to meet, creating a utility that’s there for the sake of transacting institutional-sized blocks.”

 

The fund says institutional investors, and the savers they represent, are wasting money paying multiple fees amid a fragmentation of anonymous trading venues over the past decade. The dark pools have become associated with the phenomenon of front-running, in which bid and offer information is used by high-frequency traders to pre-empt transactions and make a profit at the expense of investors.

 

The fund, which manages Norway’s oil wealth and holds about $517 billion in stocks globally, is constantly looking for ways to prevent its investments being targeted by high-frequency traders as it lobbies for fairer platforms.

 

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The major issue that needs to be addressed is “liquidity fragmentation” as pools compete against each other on fees and services, according to the fund. It has introduced a “white list” of permitted pools to avoid exchanges prone to high-frequency trading.

 

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“We’re in favor of trying to reduce the number of block crossing venues,” Schanke said. “One would probably be perfect.”

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Still - the rest of the world should probably just continue to ignore these risks as "from the fringe"... because what does the biggest pension fund in the world know??