Become a fan of Slashdot on Facebook

 



Forgot your password?
typodupeerror
×
IT

The Norwegian Sovereign Wealth Fund's $92 Million Excel Error 49

FT Alphaville: Last year, Norway's $1.5tn sovereign wealth fund revealed that it had lost NKr980mn, roughly $92mn, on an error relating to how it calculated its mandated benchmark. Here's what Norges Bank Investment Management said at the time: "In February this year, a calculation error was discovered in the composition of the index we're measured against. This error led to a marginal overweight in US fixed income relative to global fixed income. When this was discovered, we immediately set about correcting it, but because the fund is so large, the return was 0.7 basis points. Due to this our previously reported positive relative return of NOK 118 billion was adjusted down to NOK 117 billion."

It is a good example of how even tiny operational mistakes can have mammoth-sized consequences in nominal terms when you manage one of the world's biggest pools of capital. Sometimes a mistake can even lead to a windfall -- such as in 2021, when NBIM apparently made NKr582mn by accidentally accumulating an outsized position in a rising stock. But the 2023 index snafu is by far the biggest the fund has registered, almost twice as large as the cumulative operational-accidental losses it suffered from 2010-20. Alphaville was intrigued. What exactly went wrong? Well, in a recently-released anthropological report commissioned to investigate its own culture, NBIM seems to have inadvertently revealed just how minuscule the mistake was.

Here's an NBIM employee called "Simon" recounting the debacle to the report's author, Tone Danielsen. Alphaville's emphasis below: "Last year (spring 2022) we had an off-site. One of our workshops was on 'Mistakes and how to deal with them.' We wrote post-it notes, classifying them into different categories from harmless to no-goes. One of my post-it notes, I remember it vividly, read: Miscalculation of the Ministry of Finance benchmark. I placed it in the category unforgivable.

When I wrote that note, I honestly couldn't even dare to think about the consequences. And less than a year later, I did exactly that. My worst nightmare. It was a manual mistake. My mistake. I used the wrong date, December 1st instead of November 1st which is clearly stated in our mandate. The mistake was not revealed until months later, by the Ministry of Finance. They reported back that the numbers did not add up. I did all the numbers once more, and the cause of the mistake was identified. I immediately reported to Patrick [Global Head] and Dag [Chief]. I openly express that this was my mistake, and mine alone. I felt miserable and was ready to take the consequences -- whatever they might be."
This discussion has been archived. No new comments can be posted.

The Norwegian Sovereign Wealth Fund's $92 Million Excel Error

Comments Filter:
  • This is like someone who makes $150,000 a year making a mistake that costs them $9.

    • by Xenx ( 2211586 )
      They lost almost 1/118. It comes out to around $1200 out of $150,000, in your context.
    • Re:Context (Score:5, Interesting)

      by timeOday ( 582209 ) on Monday February 12, 2024 @05:56PM (#64235302)
      I'm not even clear on whether it cost them anything, or simply made them previously over-estimate the value of their fund which they subsequently had to correct.

      Or did it cause them to put a little more of their fund than they intended into a stock that undeperformed a little? That could be called a loss in hindsight, but was just as likely to be an accidental gain.

      • by ceoyoyo ( 59147 )

        My question as well. The FT article teases several times with "what really happened?" and answers the question with a human interest anecdote.

        It sounds to me like somebody made an oops and as a result a report over-estimated their profits, which they had to revise. Somebody, presumably trawling for tidbits through this anthropological report, wrote a story about it and a bunch of weird websites and the Financial Times carried it.

  • about his drink at his retirement resort.

  • by AnyoneEB ( 574727 ) on Monday February 12, 2024 @06:05PM (#64235310) Homepage

    I openly express that this was my mistake, and mine alone.

    This is broken thinking. Processes never go wrong due to a single mistake. If you think there was only one mistake, then the second mistake was not designing the process to have a check for that category of mistake. If this computation was so important, surely there should have at least been a second set of eyes on it. I guess we're reading this article because there was a second pass on the computation, it just happened months too late.

    • by Luckyo ( 1726890 )

      This is correct thinking. Where you assume responsibility for your mistakes, rather than blame "the system".

      There's a reason why nations where people are culturally trained to behave like this are rich and peaceful, whereas nations where people are trained to blame "the system, the process, etc" as you suggest are universally much worse.

      • No, the GP is correct. Psychologically no one attaches as much importance to their own mistakes as to those of others, so your "culture of assuming your personal responsibility" cannot be the sole cause of the system working better; if it were, a culture of "uncovering the mistakes of colleagues and making them pay for them" would work even better.

        What really improves a system is "making sure that mistakes are discovered and corrected, no matter who makes them". Owning the errors in your work may be a part

        • by Luckyo ( 1726890 )

          You're utterly confused. My guess you're anglo fed on the current woke culture and "personal responsibility is whiteness, and whiteness is evil and must be exterminated", which causes you to regurgitate the following woke talking points uncritically. Let me explain:

          >cannot be the sole cause

          "You're wrong because it's not the only factor"

          This is reductio ad absurdum. Main factor is rarely if ever the only one. "All/Not all" is one of the primary ways woke theorists use to confuse normal people. Fight this

      • by bn-7bc ( 909819 )
        woops yea I made the classic mistake of basing my above comments on the title (not even the summary as bad as they often are), i thought it was in fact A (as in singular) fat finger type mistake, and not a concatination of misstakes resulting in a total of 0.006% of AuM, my bad
  • As much as I like to blame Excel (and spreadsheets in general) for errors like this: isn't it a date selection error ?
  • How pathetic. Save a million or two per year to have actually competent experts on staff, lose a lot more. It is time to stop tolerating incompetent management.

  • It's not as if balance accounts are physical magnitudes. Accounting is a human tool used by humans to make decisions, a number that summarizes a million inputs into a comprehensible codified simulation.

    In a system as big and complex as a country's finances, what matters most for making decisions is the changes in the inputs, that causes the value to be updated (cybernetics 101); so, the actual exact value only matters to the few companies or projects on the margin, that would be placed in a different class

  • Whilst amusing, I don't know what the lesson is? Automate everything and take humans out of the equation I guess?
  • I placed it in the category unforgivable.

    Your category. Not necessarily everyone's category.

    I once killed a man, by forgetting an important part of a procedure. As soon as the emergency was over (the ambulance took the guy away, the paramedic still working on the corpse ; he was a DOA), I realised my mistake. I have never forgiven myself for not living up to my own standards. But everyone who has been fully trained for such situations, to whom I've described the events, has told me to forgive myself. Stil

Those who do things in a noble spirit of self-sacrifice are to be avoided at all costs. -- N. Alexander.

Working...