CEO drama at Norway's US$1.2 trillion wealth fund hits new hurdle

[OSLO] The hedge fund manager selected to run Norway's US$1.2 trillion sovereign wealth fund faces growing political opposition after a parliamentary majority emerged to demand that his contract be reviewed for potential conflicts of interest.

Nicolai Tangen, the founder of AKO Capital LLP, is due to start as chief executive officer (CEO) of the world's biggest wealth fund on Sept 1. But on Wednesday, Norway's Progress Party tipped the scales against a smooth appointment when it threw its weight behind demands that the government review the recruitment process.

"Progress fears that this situation can hurt the reputation and the management" of the wealth fund, said lawmaker Hans Andreas Limi in an emailed statement.

The development creates a seemingly intractable conflict around the giant investor. The government doesn't think it has the legal right to intervene. But with the Progress Party's announcement, the ruling coalition - parts of which have also openly criticised the hiring process - is now outnumbered.

"This conflict must be solved immediately," Mr Limi of the Progress Party said.

On Thursday, the government ordered a fresh legal review to find out what steps it can take. Finance Minister Jan Tore Sanner also said he would initiate a dialogue with Norges Bank, which manages the wealth fund.

The political tension surrounding Mr Tangen's appointment could even put pressure on the krone in the "near term", SEB wrote in a note to clients on Thursday.

Parliament is due to decide on the matter on Friday. Although a majority of parties have voiced their displeasure over the recruitment process, it's still unclear whether Parliament's Finance Committee will do anything that could derail Mr Tangen's appointment.

PERSONAL WEALTH

Mr Tangen is under pressure to do more to distance himself from his hedge fund. He's already reduced his stake in AKO to 43 per cent and put his holdings in a blind trust. He's also made clear he doesn't want to run the wealth fund if it means he'll be forced to divest entirely.

Political sentiment around Mr Tangen's candidacy soured after a key watchdog overseeing his recruitment underscored its criticism of the process last week. Norges Bank, which handled the hiring process, failed to adequately address conflicts of interest, including AKO's use of tax havens, according to the watchdog. It also criticised Norges Bank's decision to leave Tangen off an official list of candidates, which the bank has acknowledged was wrong.

As recently as Tuesday, the acting CEO of the wealth fund, Trond Grande, said Mr Tangen is still expected to start on Sept 1.

BLOOMBERG