The Norwegian oil fund lost or failed to generate 86 million dollars due to a simple error in Excel. (Image source: Unsplash/Pepi Stojanovski)
Last year, Norway’s 15 trillion crown (NOK, that’s around 1.3 trillion dollars) state pension fund lost or didn’t earn around NOK 980 million due to an error in calculating its benchmark – that’s the equivalent of 86 million dollars.
Specifically, the error is said to have been an incorrect entry into the spreadsheet software Excel, according to a report by the renowned Financial Times emerges (behind a paywall).
Although the incident had already occurred in February 2023, it only became known in August of last year. However, the Financial Times only recently became internationally aware of this.
How did the loss of 86 million dollars come about?
Norges Bank Investment Management (NBIM), which operates as part of the Norwegian Central Bank Norges Bank
the sovereign wealth fund (also called the oil fund), explains the incident as follows:
In February of this year, a calculation error was discovered in the composition of the index by which we are measured. This error resulted in a slight overweighting of US bonds relative to global bonds. When this was discovered we immediately set about correcting this, but because the fund is so large the return was 0.7 basis points. This revised down our previously reported positive relative return from NOK 118 billion to NOK 117 billion.
The Norwegian central bank “Norges Bank” runs the oil fund. This is worth 1.3 trillion dollars. However, the photo only shows a symbolic bank building. For licensing reasons we cannot show you a picture of Norges Bank. (Image source: Unsplash/Etienne Martin)
The difference of almost NOK 1 billion (NOK 980 million) came about because an employee who worked in another Message (on page 45) only as Simon
entered an incorrect date in an Excel cell. He himself puts it like this:
Last year (spring 2022) we had a company outing. One of our workshops dealt with this Mistakes and how to deal with them
. We wrote Post-it notes and divided them into different categories, from harmless to no-gos. One of my Post-it notes, which I still remember well, was: Misjudgment of the Treasury benchmark. I put him in the category unforgivable
a.
When I wrote that note, I honestly didn’t even dare to think about the consequences…And less than a year later, I did exactly that. My worst nightmare. It was a technical error. My mistake. I used the wrong date, December 1st instead of November 1st, as our mandate clearly states.
The error was only discovered months later by the Norwegian Ministry of Finance. By then it was already too late to take countermeasures.
Given the huge sums that the sovereign wealth fund moves, even the smallest mistakes can have major consequences. The Loss
of 86 million is said to be the largest of its kind. It is twice as high as the total losses caused by errors from 2010 to 2020.
However, it is unclear whether this is an actual or a relative loss (i.e. less profit) in relation to the return.
The fuss made over it appears to be a real loss. On the other hand, there is talk of the fact that the positive relative return (the profit measured based on the capital employed) had to be revised downwards, which suggests a relative loss.
It is also unclear how exactly the incorrect date came about Loss
has led.
What happened to the employee (Simon)?
Contrary to all expectations, Simon was not fired. Nicolai Tangen, the head of the NBIM and thus also the Norwegian State Pension Fund, puts it this way in a letter to the head of risk monitoring Patrick du Plessis and Simon:
Things like that happen! We run a complex business and I am surprised that there have been very few or no such incidents in the past. They are both very professional and make an important contribution to the success of NBIM.
Don’t let it ruin your weekend.
But Excel is no longer just a spreadsheet. You can even program games in it, as the following article shows:
What do you all mean? Is the 86 million dollars »loss« Do you think this is a reason for termination? Or do you see it as loosely as the CEO of the NBIM Nicolai Tangen? What do you generally think about the fact that the monetary economy involves such large amounts that are actually comparatively small? What would you do with 86 million dollars? Feel free to write it to us in the comments!
