Management of listed investments

Issued 15 December 2017
Last updated 12 June 2024

Policy

The portfolio is managed relative to the benchmark index as defined by our management mandate. We shall use a diverse set of investment strategies to manage the Fund in a risk-controlled manner within the limits of the mandate. The strategies shall be complementary and tailored to the Fund's characteristics. 

Investment mandates

• Investment decisions shall be regulated through investment mandates.
• Investment mandates shall define investment universe, benchmark, investment risk limits and other specific investment rules as applicable.
• Investment mandates shall be approved according to delegation and are subject to regular review by the mandate issuer.

Investment research

• Strategic advice to the Ministry of Finance shall be based on academic research and practical experience from financial markets.
• Investment decisions shall be based on research. The scope and type of research shall depend on the type of investment decision.
• As a general rule we shall do internal research rather than rely on research from external providers.
• Research shall be documented and captured in internal systems as appropriate.

Investment decisions

• Portfolio managers may only make investments within their delegated mandates and risk limits.
• Investment decisions outside mandate restrictions are subject to review and approval by the mandate issuer.
• Investment decisions pre-IPO are subject to leader group review and CEO NBIM approval. 
• Investments in listed real estate which exceed 10% ownership are subject to enhanced company due diligence.
• Implementation of investment decisions shall ensure fair and equitable treatment of funds and portfolios.

Trade execution

• Trade execution shall, where feasible and appropriate, be separated from investment decisions.
• Trade execution shall aim to ensure as low transaction costs as possible, within given time, mandate and risk constraints.
• Trade execution shall be captured in our investment management platform.
• All transaction processing shall be closely monitored to ensure timely settlement. Any deviations shall be followed-up and corrected.
• Transaction processing shall seek to be automated to reduce operational risk and cost. 
• Asset holdings, cash and corporate action entitlements shall be reconciled with the custodians holding assets on NBIM's behalf on a regular basis.
• Order aggregation, crossing, execution, and allocation of holdings between different funds and portfolios shall be fair and equitable.

Cash management

• Cash management activities shall ensure that portfolio liquidity needs can be met on an on-going basis.
• Cash management activities shall aim to minimise the cost of funding short cash balances and maximise the return on investing long cash balances.
• Cash management activities shall aim to diversify and reduce counterparty and credit risk.

Securities lending

• We shall support global standards for securities lending that promote the well-functioning of markets and counteract market abuse or misconduct such as empty voting and tax arbitrage.
• Securities lending may be conducted internally, or with external securities lending agents.
• Securities shall only be lent to approved counterparties and where the counterparty risk is duly managed. Securities lending transactions shall be adequately collateralised.
• The security lending portfolio shall not have economic ecposure or to be used to leverage risk positions.
• Certain securities shall be restricted from lending to facilitate ownership priorities. 
• When lending securities, we shall seek to retain a minimum of one voting share in each company to ensure that we can participate and vote in general shareholder meetings.
• The contractual right to recall lent securities shall as a general rule be maintained but may be waived on case-by-case basis.
• Shares shall not be borrowed to vote nor shall shares held in collateral be voted upon.

Portfolio management

• Portfolio managers are responsible for adhering to the restrictions of their investment mandate.
• Portfolio managers should generally be involved in voting decisions for investments under their coverage.
• Portfolio managers are responsible for corporate actions within their portfolios.
• Corporate actions that significantly impact several portfolios should be coordinated between the respective portfolio managers and managed in the overall interests of the Fund.

Mandate monitoring

• All mandates shall be monitored for adherence to mandate specific investment rules and restrictions.
• The aggregated investment activities shall be monitored at Fund level to ensure fair and equitable treatment of Funds, compliance with the mandate from the Ministry of Finance and supplementary rules from the Executive Board.
• A breach of any mandate shall be followed-up and managed accordingly.
• Any breach of the Ministry of Finance mandate shall be reported to the Executive Board and managed accordingly.