Norway’s $1.4tn wealth fund calls for state regulation of AI

The head of the world’s largest sovereign wealth fund has called on governments to speed up the regulation of artificial intelligence as it revealed it would set guidelines for how the 9,000 companies it invests in should use AI “ethically”.

Nicolai Tangen, chief executive of Norway’s $1.4tn oil fund — which owns on average 1.5 per cent of every listed company globally — said he believed that there is not enough regulation of the fast-growing sector and that he wanted new rules to govern how AI is used.

“We think authorities and governments should regulate. We are not seeing a pipeline of regulation coming yet,” he added.

The fund is a big investor in tech companies such as Apple, Alphabet, Nvidia and Microsoft, which are all aiming to use AI to transform their businesses.

Tangen said the fund would unveil a set of standards in August for how it wants companies that use AI to behave. That would bring it into the fund’s responsible investment framework, which sets the standards for ESG investing in Europe given its huge size.

Governments around the world are grappling with whether and how to regulate AI or to give innovation a free hand amid worries about how far superintelligent computers could go if left unchecked. The EU is drafting what is seen as the toughest rules currently on AI.

The oil fund will also consider whether to use AI to help it with proxy voting on tens of thousands of motions at next year’s annual shareholder meetings when it reviews the current season in the autumn, its chief corporate governance and compliance officer, Carine Smith Ihenacho, said in the same interview.

Tangen, who has also warned that climate change will keep inflation high, said the fund was already using advanced algorithms to reduce trading costs and complexity and to boost internal productivity.

“I’m super excited by AI. We have a target for increasing efficiency in the fund by 10 per cent over the next 12 months. It’s a big hairy goal. We are seeing it in so many places where it’s driving efficiency,” Tangen said.

The fund makes 36mn trades a year, and Tangen believes AI can help it eliminate trades, for instance different rebalancing models that currently could push it to buy a stock one day and sell it the next.

“The way we are putting money into the market, we are using AI models to predict when in the day, or over the month- or quarter-end we should deploy the capital. We are reducing trading activity because we are using AI models,” he said.

“So you can reduce the number of trades, and there are huge savings to be had there too,” he said, adding that: “It’s not like it’s on complete autopilot. We are monitoring it. It’s not like we’re the giving the fund to robots, and saying ‘hey, see you later’.”

Tangen said the fund had a big project with a “very big” but undisclosed goal to cut trading costs significantly by changing other things such as how it incentivises portfolio managers as well as using AI.

Last week the fund held its own “hackathon” involving 130 people looking at how the sovereign wealth fund can best use AI itself.