A Hedge Fund Manager’s Dream Job Comes With Drastic Pay Cut

(Bloomberg) -- At 53, the London-based hedge-fund manager behind $16 billion AKO Capital LLP says he’s about to step into his dream job. But his new take-home pay won’t even be enough to cover the wealth tax he now faces.

Nicolai Tangen was recently revealed as Norway’s surprise pick to run its giant wealth fund. His investment war chest is set to grow by a factor of about 60, to $950 billion. Meanwhile, his salary may well shrink to a lot less than $1 million, and would cover about a tenth of the wealth tax he’ll need to pay.

Tangen, a Norwegian national who’s returned over $8.6 billion to AKO investors since it was created 15 years ago, says he’ll “gladly pay that tax” in exchange for the “fantastic honor” of running the world’s biggest sovereign wealth fund.

The process says something about the job and the kinds of profiles who tend to get it. Norway’s central bank, which manages the fund, says Tangen accepted his new role without even discussing pay. The fund’s outgoing chief executive, Yngve Slyngstad, got 6.7 million kroner ($632,000) last year.

Slyngstad, who ran the fund for 12 years, had five degrees and a famously deep grasp of German philosophy. Tangen, aside from his career in finance, has degrees in art history and social psychology (he’s also a qualified chef.)

As Tangen prepares to take over in September, he’ll face a unique situation. With the coronavirus pandemic set to trigger a global recession, Norway’s government might for the first time need to withdraw more cash from its wealth fund than the vehicle generates in cash flow. That would force the fund to liquidate assets.

Whoever runs Norway’s fund watches over the wealth of an entire nation. Built on decades of oil and gas income, the fund is governed by strict rules including ethical requirements. It only invests abroad, in stocks, bonds and real estate. Any changes to its investment mandate require parliament’s approval.

Tangen will have little leeway to stray from the global indexes Norway’s wealth fund tracks. But because of its vast size, even tiny adjustments can have big repercussions.

“When there’s so much money,” then “you only need to create a small excess return in percent for it to turn into enormous amounts,” Tangen said in a phone interview from London.

The new CEO’s own net worth has been estimated at around 5.5 billion kroner. Tangen plans to transfer his interest in AKO to a charitable foundation that will then have about 5 billion kroner in funds. He intends to keep 560 million pounds ($690 million) in cash and AKO funds, according to newspaper Dagens Naeringsliv.

Meanwhile, he’s had to defend his tax record in Norwegian media, amid reports that AKO registers its funds in the Cayman Islands, which is a tax haven. Tangen says the intention was to avoid double taxation.

Before returning to Norway, the hedge-fund manager has gone out of his way to declare his support for high tax rates. The father of three says he doesn’t want his children to inherit the bulk of his wealth, and even added during a press conference on Thursday that he believes in a 100% inheritance tax. An excessive inheritance robs children of the chance to get credit for their own achievements, he said.

But in an illustration of how Tangen is already adapting to life under much greater public scrutiny, he backtracked on his inheritance tax comments on Sunday. In a post on the fund’s Facebook page, Tangen apologized and said it only reflected his personal view of his own family’s situation.

The head of Norway’s sovereign wealth fund “should quite clearly not be making statements that can be interpreted politically,” he said. “I’m sorry.”

©2020 Bloomberg L.P.