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Three months into running Norway’s $1.3 trillion fund, Nicolai Tangen grapples with public scrutiny and joins the active versus passive debate

Nicolai Tangen made his name picking stocks in the cloistered world of hedge funds. Now he is sparring over an active approach to running the world’s largest sovereign-wealth fund—historically a bastion of passive investing.

Mr. Tangen—three months in as chief executive of Norges Bank Investment Management, the arm of the Norwegian central bank that operates the fund—says active management boosts investment returns and lays the groundwork for interacting with companies. Purists say stock picking is a waste of money and returns at the 10.838 trillion Norwegian kroner fund, equivalent to $1.265 trillion, would hold up fine without it.

Established in the 1990s to invest revenues from oil discoveries, the oil fund, as it is known, is now worth three times the country’s annual gross domestic product and safeguards wealth for the future.

“Norwegians really feel it’s their money, and they really care who runs it,” Mr. Tangen said in an interview.

Now the years-old debate has bubbled up again, with Mr. Tangen himself weighing in. The core of the dispute: how integral active asset management should be to the strategy of the sovereign-wealth fund.

Espen Henriksen, a finance professor at BI Norwegian School of Business, says it is puzzling that a hedge-fund manager was chosen to run the engine room of a de facto index fund.

That discussion was part of a wide-ranging furor over Mr. Tangen’s appointment, which attracted the most public attention in the fund’s history, said Camilla Bakken Øvald, an economist who has written a book on the fund.

Problems first arose when it emerged Mr. Tangen, 54, had offered his predecessor, Yngve Slyngstad, a plane ride home from a glitzy seminar Mr. Tangen hosted in November 2019. Mr. Tangen had invited Mr. Slyngstad to the event, which featured a Sting performance, a year and a half before the job came open, but questions were raised over the pair’s interactions. Mr. Slyngstad later apologized for accepting the ride. The central bank said Mr. Slyngstad had no part in hiring Mr. Tangen.

Then there was the central bank’s willingness to let Mr. Tangen keep his 43% stake in AKO Capital LLP, the investment firm he founded. An outcry over potential conflicts of interest and the hedge-fund industry’s use of tax havens forced him to transfer the stake to his charitable foundation and liquidate his personal fund investments. Mr. Tangen has an estimated net worth of £550 million, equivalent to $744.2 million, according to The Sunday Times Rich List.

Mr. Tangen said he aims to make the fund as much money as he can within a mandate given by the Ministry of Finance. Portfolio managers can make small tweaks to holdings in 800 of the more than 9,000 listed companies in which the fund invests. The rest are governed by an index. The fund can’t invest in most private companies.

“Active management has given the fund considerable extra return and is a prerequisite for engagement with companies,” Mr. Tangen said.

In recent days he has exchanged words in the Norwegian press with critics who say the costs are excessive.

“You could eliminate stock picking and reduce costs and you wouldn’t have a return that would be any worse,” said Halvor Hoddevik, who runs a financial-advisory firm in Oslo.

Mr. Tangen on Friday wrote that since 2014, active management has earned an extra 66 billion kroner for the Norwegian people.

The fund has returned an annualized 5.8% since 1998 and exceeded its benchmark by roughly 0.25 percentage point. Anything over the benchmark constitutes an active return.

The fund will further divest from companies on environmental, social and governance grounds, Mr. Tangen said, offering an example of active management. It will also increase its use of external asset managers.

Active management has paid off for the fund in the past. Portfolio managers last year discovered irregularities at German payments company Wirecard AG , which, coupled with Financial Times coverage, caused them to sell holdings. When Wirecard in June said cash had gone missing, the fund minimized its losses by unloading remaining shares before their value plunged.

Diego López, managing director of consulting firm Global SWF, said Mr. Tangen’s hedge-fund background could signal a more agile and less risk-averse strategy.

That means using more of the tracking error, fund-watchers say, which refers to the deviation from the benchmark portfolio return. Others expect Mr. Tangen to ramp up stock picking and limit bets based on macroeconomic environments or tied to factors like growth.

People who know Mr. Tangen from his time at AKO Capital, the $21 billion firm named after his children, say he is process-oriented and rigorous. He studied interrogation in an elite Russian-language program in the Norwegian intelligence service.

“Nicolai is willing to pay up for quality,” said Lawrence Cunningham, who wrote a book on investing with AKO Capital portfolio managers. The firm has returned an annualized 11% since 2005 in its flagship strategy.

Chats with 140 oil fund employees before he started (“one of the great characteristics of Scandinavians—they tell you the truth,” he said) have prompted Mr. Tangen to initially focus on the fund’s performance, communication and talent development.

The fund has benefited from its 70% allocation to stocks during the year’s swerving markets, despite a 3.4% loss in the first half. Its second-quarter performance was its best ever, boosted by equities added during the spring selloff. It was up 4.3% in the third quarter.

Mr. Tangen is acclimating to the public realm. Newly prolific on LinkedIn, he revealed last month he had contracted, and then recovered from, Covid-19. He also offered to buy Cokes for successful job applicants. The fund wants to hire from all religious backgrounds, so drinks need to be nonalcoholic, he wrote. Despite the internal emphasis on diversity, Mr. Tangen says the fund won’t divest from companies on that basis.

Book authors tied to big film franchises stopped receiving checks after Disney acquired Lucasfilm and Twentieth Century Fox

Alan Dean Foster was in his late 20s when George Lucas, standing near a model of the Millennium Falcon in a warehouse in Southern California, met him to discuss writing the novel adaptation of his forthcoming movie “Star Wars.”

The original contract called for an upfront payment of $7,500, until Mr. Lucas tossed Mr. Foster a 0.5% royalty on sales that Mr. Foster, now 74 years old, says added up to several times that initial payment. They arrived several times a year as the original 1977 blockbuster set box-office records and the novelization he wrote went on to sell more than one million copies.

Then, in 2012, Walt Disney Co. DIS -0.38% bought Lucasfilm Ltd.—and the royalty checks stopped.

Now, Mr. Foster and other authors from Disney DIS -0.38% -purchased franchises are in a heated dispute with Hollywood’s biggest empire, which they say refuses to pay royalties on book contracts it absorbed in the $4 billion Lucasfilm deal and other acquisitions. The amount of money at stake is minuscule to a company of Disney’s size but important to the writers seeking it. While Disney has mined Lucasfilm for new movies that have collectively grossed nearly $6 billion at the world-wide box office, these writers say the company has delayed dealing with their complaints and stiffed them on checks that rarely total a few thousand bucks apiece.

Since Mr. Foster’s dispute was taken public by the Science Fiction and Fantasy Writers of America association, other authors of books tied to projects from Indiana Jones to “Buffy the Vampire Slayer” have come forward with similar stories of royalty checks that stopped after Disney acquired the properties. In each case, Disney threatens to alienate an obscure but vital tentacle of the franchises, as these novelizations helped build and maintain fan loyalty. Complicating matters: The exact amount of money at stake is unknown, since sales and royalties for the books involved have fluctuated wildly over time.

A Disney spokesman said: “We are carefully reviewing whether any royalty payments may have been missed as a result of acquisition integration and will take appropriate remedial steps if that is the case.”

Mr. Foster, who is well-known to longtime Star Wars fans, says Disney is ignoring the workaday players who help build intergenerational connections to beloved characters. He and his wife are both in poor health, and he said the royalty earnings could come in handy for medical expenses.

“I’m not Steve Spielberg. I’m not Steve King. I don’t even have a name that starts with Steve,” he said.

The dispute began in the summer of 2019, when Mr. Foster’s literary agent, Vaughne Hansen, first asked Disney why he had stopped receiving royalty checks on three novels he had written tied to “Alien,” the outer-space horror series produced by Twentieth Century Fox, the studio Disney bought as part of a $71.3 billion deal in 2019.

Mr. Foster and his agent then realized the same thing had occurred to his royalties for two Star Wars books after Disney bought Lucasfilm.

In response to queries about the “Alien” checks, a Disney attorney told Mr. Foster that the company had acquired the rights to these books, but not the obligations to pay out royalties. But in the case of “Alien,” Ms. Hansen said, the rights to Mr. Foster’s novels had been reassigned several times, with no interruption of royalty checks, before Disney bought Fox.

“Disney has acquired a house with a mortgage on it. They want to keep living in the house. They don’t want to pay the mortgage,” Mr. Foster said.

The writers group says a similar pattern has emerged following other Disney acquisitions. At least a half dozen writers across a range of Disney-owned properties have since said they are in the same boat, said Mary Robinette Kowal, president of the Science Fiction and Fantasy Writers of America.

Disney has begun reviewing the “Alien” case, but there is a line of writers behind Mr. Foster waiting for a turn at the negotiating table. In total, Ms. Hansen estimates her client had made more than $50,000 in royalties on the original Star Wars novelization alone before the checks stopped in 2012.

If Disney agrees to calculate the missing royalties, it faces a daunting task tracking down sales that cover six years and, in Mr. Foster’s case alone, five novels published in dozens of international markets.

Donald Glut, a writer who novelized 1980’s “The Empire Strikes Back,” and James Kahn, who adapted the third film of the original trilogy, “Return of the Jedi,” both have said they are missing royalty checks, too.

If a resolution isn’t reached, the writers association could take further action, said Ms. Kowal, including putting Disney on a list of publishers it tells its members to avoid. The term given to such a designation: “Writer Beware.”

Tobias Moers paves way for engineering renaissance as he launches fresh model offensive at luxury car brand

fresh focus on better engineering.

In his first interview since taking the job in August, Tobias Moers said he has “broken down silos” between units and overhauled every part of the business to try and rejuvenate the company.

The brand will release 10 derivatives of existing cars within two years including two offshoots of its new DBX sport utility vehicle, as part of a planned model offensive, he told the Financial Times.

Mr Moers wants to refocus the company on engineering and bring more of its development in-house from suppliers, while working more closely with Mercedes-Benz to produce bespoke engines for the company.

Daimler, Mercedes’ parent company, owns a fifth of Aston’s shares and already supplies the British carmaker with some technology.

He also plans to boost Aston’s German engineering outfit, which is based at the country’s famous Nürburgring race circuit.

“Our technology partnership is there [in Germany], all the engineering suppliers are there, we should do something there to get the most efficiency out of the whole corporation,” he said.

Mr Moers was parachuted into the role from head of Mercedes’ AMG, the high performance subsidiary, over the summer by Aston’s chairman Lawrence Stroll, who led a rescue of the business earlier in the year.

Mr Stroll aims to restore the marque’s luxury credentials, and has installed a team he believes will help the business begin generating positive cash by 2023.

His arrival at the company this year also coincided with a large-scale clear-out of its executive team.

As well as a new chief executive and chairman, within the last year the company has replaced almost every top flight position, including the most senior executives in finance, sales, product planning, operations, engineering and the US, its largest international market.

The company has pushed back its first battery electric model, which will now be an Aston Martin instead of a Lagonda, the luxury sub-brand that is part of the group. The company has yet to reveal its new plans for the Lagonda nameplate.

“The electric car has to be an Aston Martin,” said Mr Moers, “because if you bring a new brand to life for electric vehicle cars, that’s wrong in my perspective.”

Sales of its DBX sport utility vehicle have been gaining “momentum” in China, which is typically a weak market for sports cars despite having one of the largest global pools of luxury car buyers, Mr Moers said.

About a fifth of orders for the SUV in the market are from women, with a large number of its customers new to the brand.

While Aston had internal problems to tackle, one of the external challenges is tightening emissions regulations, particularly in Europe and China, which may force the group to withdraw cars with its flagship V12 engine.

Mr Moers said debate is live within the business whether it can make its V12 engine comply with incoming “Euro 7” engine regulations. “I’m not sure honestly, that’s the honest answer,” he said.

However, the brand will still have “aficionados for a V12” around the world, he added.

After floating in 2018, Aston suffered a collapse in its shares after a string of profits warnings stemming from having too many unsold cars piling up in dealerships.

Mr Moers added the company will have less than 1,000 excess cars left in showrooms by January, down from 2,800 at the start of this year after an intensive programme of destocking,

Plan to inoculate 20m Americans pushed back to new year as states complain of slashed doses

The US will miss its target of distributing enough coronavirus vaccine to inoculate 20m people by the end of the year, a senior Washington official admitted on Saturday, after underestimating how long it would take to check doses once they were produced.

Gustave Perna, the army officer in charge of the federal government’s vaccine distribution programme, said on Saturday that states would not receive 40m doses of the vaccine until the first week of January, a week later than predicted.

He said he had not understood how long it would take for the Food and Drug Administration to carry out quality control checks on Pfizer’s vaccine once it had been manufactured, leading him to be overly optimistic in his projections.

Gen Perna told reporters on Saturday: “I did not understand with exactness all the steps that have to occur to make sure the vaccine is releasable. I failed, I am adjusting, and we will move forward from there.”

Gen Perna apologised to state governors, several of whom complained this week that their vaccine allocations had been slashed by as much as 40 per cent. The vaccine distribution chief explained he had provided early estimates which had failed to account for the quality control process and so overestimated how quickly doses could reach states.

Under FDA rules, Pfizer must test all batches of a vaccine once they have been manufactured to make sure they are safe, pure, and potent. It then has to send the results of those tests to the regulator 48 hours before they can be released for distribution. Gen Perna did not say which part of that process he had misunderstood.

The admission threatened to blunt some of the optimism generated by the FDA’s approval on Friday night of Moderna’s vaccine, making the US the first country in the world to approve two different Covid-19 vaccines.

Gen Perna said doses of Moderna’s vaccine had already been sent to McKesson, the medical logistics company which is in charge of distributing them. UPS and FedEx, the delivery companies, will start shipping them on Sunday, and states will start taking delivery on Monday.

Moderna’s vaccine can be stored at normal freezer temperatures rather than the ultra-cold conditions required for Pfizer’s product, and so is a crucial part of the government’s plans for getting doses to remote communities.

Gen Perna said this would allow officials to immunise people in “hard to reach, small and more rural areas”. He added: “This is another landmark day for our nation.”

This year was all about the SPAC.

Cashing blank checks

It was a difficult year for deal makers to describe. Early on, the pandemic made the notion of corporate takeovers seem, for a few months, like something from a lost era. But then came a burst of activity like few had ever seen before, even as the health crisis raged.

Amid the twists and turns, the single biggest thing on merger advisers’ minds can be summed up in four letters: SPAC.

Short for special purpose acquisition companies, these publicly traded shells are created solely to merge with a privately held business, giving the takeover target a ready-made listing without having to stage an initial public offering. Once dismissed as a shady Wall Street relic, SPACs have since become the hottest tickets in mergers and acquisitions. (In an industry with strong herd instincts, it isn’t much of a stretch to say that nearly anyone who’s anyone has one.)

And as deal makers look ahead to 2021, a common thread to their predictions — from continued growth in blank-check funds to a rise in takeover activity in general — is that things are only looking up from here. There’s perhaps no better sign of that renewed confidence than the surge in SPACs.

As of this week, nearly 45,000 deals worth $3.4 trillion had been announced this year, down 8 percent by number and 7 percent by value from the same point a year ago, according to Refinitiv. What’s remarkable is that the drop wasn’t worse: Overall deals were down 40 percent by value at midyear.

The economic troubles that the pandemic imposed on the deal-making business are well known. But top mergers advisers say the speed and strength of the comeback since late summer surprised them:

The past few months have seen “one of the most active markets in history,” said Stephan Feldgoise, co-head of global M.&A. at Goldman Sachs.

“We’re accelerating into the end of 2020,” said Patrick Ramsey, global head of M.&A. at Bank of America. “What started in the more resilient sectors, like health care and tech, has spread across nearly all sectors.”

“2020 was a miracle,” said Dirk Albersmeier, global co-head of M.&A. of JPMorgan Chase.

Others said the desire for deal-making never went away, even during the depths of the pandemic, but the lull was merely a matter of being able to pull it off. “People saw value during the dark days, but often didn’t have the constituency or support to carry out a transaction,” said Peter Weinberg, the chief executive of Perella Weinberg Partners.

A flood of cheap debt, made possible by the Federal Reserve’s emergency aid measures, and a roaring stock market, another result of the Fed’s money spigot, gave would-be buyers the confidence to go back into the market. Then, they struck the deals they had been eyeing — over Zoom meetings instead of power lunches.

The undeniable star of the deal industry in 2020 was the SPAC. Investors flocked to these blank-check vehicles as they hunted for takeover targets. And an increasingly eclectic range of sponsors — from the former baseball manager Billy Beane to Paul Ryan, the former House speaker — rushed to create yet more funds (see the note about herding, above).

The numbers tell the tale: 242 SPACs were introduced this year, four times the number raised last year, according to SPAC Insider. The average size of a SPAC in 2020 was $335 million, nearly 10 times the amount in 2009.

The appeal to buyers and sellers is apparent. Sponsors generally get a 20 percent stake at very little cost — known as the “promote” — which turns into a big stake in the target company after a merger. Sellers can go public without the hassle or restrictions of a traditional I.P.O., a benefit that attracts venture capitalists in particular.

”We’ve seen higher-quality companies merging with high quality SPACs,” said Mr. Ramsey of Bank of America. “That’s driven strong performance, and sparked more private companies to express interest in SPACs.”

Indeed, advisers expect tweaks that could make SPACs more of a permanent part of the deal-making landscape. The hedge fund mogul Bill Ackman raised a record $4 billion for a SPAC in July, enough to let him reportedly approach Airbnb about a merger. (It didn’t go anywhere, but the notion of a SPAC swallowing a target of that size is significant.)

Advisers note that even corporations like Liberty Media are now raising SPACs, aiming to buy businesses that they couldn’t otherwise afford. And bankers are studying ways to create permanent funds to pump additional money — so-called private investments in public equity — into SPACs to help them acquire ever-larger targets.

“I think the SPAC business has become a large and sustained ecosystem,” said Michael Klein, the veteran banker who has since raised a series of SPACs that have struck multibillion-dollar takeovers, including those of the health care services provider MultiPlan and the analytics software company Clarivate.

Some financiers have now made a business of raising SPAC after SPAC. Mr. Klein recently raised $450 million for his fifth Churchill Capital fund. The venture capitalist Chamath Palihapitiya, who took Virgin Galactic public, has raised a series of funds in search of takeover targets.

And deal makers expect the SPAC craze, to date largely an American phenomenon, to go global. Earlier this month, the French billionaire Xavier Niel raised €300 million ($368 million), for a blank-check fund, in what was the biggest market debut in France this year.

What could go wrong?

Popular targets of SPAC deals this year have been electric vehicle companies, some of which have stumbled badly since going public. Goldman Sachs’s strategists noted earlier this week that many SPACs have posted poor returns post-merger relative to the S&P 500 this year. “If weak returns persist, investor appetite for new SPACs may wane,” they wrote, which suggests that attracting investors for new funds could become trickier. The short-seller Carson Block has declared SPACs “the great 2020 money grab.”

The popularity of SPACs may also prove their undoing, advisers cautioned. Goldman’s strategists estimate that 193 blank-check funds are currently sitting on $63 billion in search of takeover targets. This implies potential buying power of some $300 billion, because the typical SPAC merges with a company five times its size, thanks to outside investors who buy into the transaction, according to LUMA Partners.

SPACs generally have two years to find a takeover target, or they are contractually required to return their money to investors. This puts them on the clock, potentially crowding each other out of deals or leading to mergers born of urgency instead of prudence. “A business model that incentivizes promoters to do something — anything — with other people’s money is bound to lead to significant value destruction on occasion,” wrote Mr. Block.

And one of the big drivers for their soaring popularity earlier this year, disappointing I.P.O. performance, may be waning. The enormous run-up in the valuations of Airbnb and DoorDash in their recent I.P.O.s may persuade some companies to return to more traditional ways of going public, leaving SPACs with billions of dollars but fewer targets worth buying.