Letter #278: Stephanie Vardheim (2024)
Norges Bank Investment Management Portfolio Manager | A day in the life of a portfolio manager
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Stephanie Vardheim is an Associate Portfolio Manager at Norges Bank Investment Management, Norway’s Sovereign Wealth Fund, which has nearly $2tn in AUM. She started her career as a Trainee at Herbert Smith Freehills in France before joining Norges Bank’s UK office as part of the Investment Talent Graduate Program. While part of the program, she joined Credit Suisse for a Secondment Equity Research. After returning to Norges Bank, she was promoted to Equity Analyst, and now Associate Portfolio Manager.
Today’s letter is the transcript and slides of a presentation Stephanie gave to 100 female students at the Norwegian Central Bank, Norges Bank, on International Women’s Day. In this presentation, she shares her story of how she landed at Norges Bank, walks the students through a normal day in the job, how she thinks about investing, and her execution phase, along with how she uses Norges Bank’s trading system and investment simulator to aid her investment process.
I hope you enjoy this presentation as much as I did!
[Transcript and any errors are mine.]
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Transcript + Slides
I decided to study law because I thought law is for clever people, I was clever girl. That's what I wanted to do. Absolutely loved law. Went with Cambridge, did a bit of English law. That was great.
Obviously, I was a good law student, I was a good girl. So obviously, I was gonna qualify as a lawyer in Paris in one of the big law firms. Started out there, and just realized... it was a shitshow. It was definitely not for me. It was basically everything I'm not. So I'm a bit of an energetic person, I like to move around--you don't want to be a corporate lawyer. Because you're going to be chained to your desk.
I also like to feel that I have some form of impact in what I'm doing. You don't want to start at the bottom in a corporate law firm. So basically, sitting in Paris, next to the Champs-Elysees, in this big corporate law firm realizing that was not exactly what I wanted to do. I started to think a bit about--obviously, when you're in this kind of situation, you start to think a bit about what do you actually want to do.
And I thought back to this great place, this great thing, that I'd followed for quite some time--the Norwegian Sovereign Wealth Fund, Oljefondet. And basically, back in 2007, so when I was in my first year of law, I remember reading this magnificent article in [inaudible magazine/newspaper name], basically saying that the Norwegian people are one of the biggest investors in the French stock market. And when you're a Norwegian, you read that, you're a bit like, How can this be true? And then you read a bit further, and you realize this amazing fund, that it's ours. And basically, as I was sitting there in Paris, I was like, maybe they have a job for me. That'd be great.
Applied to the graduate program, ended up being the first one who was non-finance or non-engineering taken into the program, which they told me when they called me, which was a bit, so you know, when you're being told, Oh, we're trying you out, kind of, as the first non-finance person. You're a bit like, Oh, okay, no pressure there. So, started at NBIM in 2014.
Actually, I started in Oslo, and tried a bit of corporate governance, which is quite related to law in a way. But then got moved to sector strategies, the investment side in London, and just to the state ever since. So I moved up, you can see I'm getting bigger and bigger. So hopefully, towards the end, I'm huge.
But basically, 2017, went up to analyst, and then in the magnificent COVID era, 2020, when we were sitting at home, I started my portfolio. So that's been a long journey, and the journey that I'm still on. And basically, every day, I jump around and get to have an impact, get to be energetic, get to go out there and find good investments.
So, I'm still loving it. I just want to--okay, we already have a penguin. That's good.
I just want to talk a bit about just a normal-ish day. So basically, and when you're working with markets, no day is really normal. Because the world isn't normal. The morning I woke up, and Russia had invaded the Ukraine, that was not a normal day. So we have all these days that are a bit un-normal. But I would say there are periods which are more like others. And that's basically when companies report earnings. So that's basically a company will report financial results four times a year, most likely. And those obviously, those are companies I'm invested in or not invested in, so I follow them quite closely. And these days are quite full on. And I've just finished the full year results period.
Coming out of that, I was like, Okay, now this is a normal day, I'm going to present to you. So this is a normal day that I had in February, more or less. So I woke up. I was great. When a company reports, it tends to be before market opens. So since I'm on London time, if it's a European company, that will be before quarter past eight in the morning. So it'd be usually be around 630, 7. So when companies reports, you don't go to the gym, you don't do morning yoga. You kind of just get up, and you're like half under your duvet, looking out at what's happening. They will usually also do a call. So the CEO, the CFO will talk about their results. So usually you would listen to that. Listen to what they say. Maybe drag out your laptop at 7am in the morning under your duvet. Try to figure out in your financial model, company model, what it actually means. At one point, when you've done all this, you actually get yourself to work.
And when you go to work, obviously the first thing you do is just browse through emails, to just check if something special has happened in markets that I should be aware of, related to my investments. And the moment you realize that's not happening, you go back to your earnings. You also look to your portfolio, because you can't control yourself. You have to see if you're making money or not that day. If it's going up, you're happy. If it's going down, you're not happy. And then you continue. You try to continue because you're in the middle of earnings. So you probably have a CEO meeting. And the CEO is probably coming into your office. You've probably already prepped it. So you have a meeting. Either--obviously on Zoom, or in person. Then, done meeting, going back to your desk. And then it's time to do tiny bit of research in between these meetings. So most likely, you will browse your--[you will see] if there is, again, anything's happened to your companies. Is there any research reports I want to read? I also have a lot of dashboards with data on my companies. So for example, I cover hotels. I get credit card data on hotels. So do I see any change in how much people are spending on holiday in different parts of the world? Maybe not. Are you guys still subscribing to Netflix or not? Are you still password sharing or not? That's the kind of data I would look at.
And then obviously, there will be pots of stuff going back into different kinds of models, thinking about different stuff. And then, in the middle of my European day, US markets open. And then everything turns around again. And then at one point, you kind of go low on battery. And that will be the time where I will Teams Venetia, and go like, Hey, Markets are crazy, do you want a coffee? And then we will pedal off and have a bit of a coffee. And then obviously I need to be back at my desk, because the company that reported today, most likely is coming in again, tomorrow, to see me. Because obviously, as big shareholders of every single company out there, we have an awful lot of meetings for CEOs.
So I will prep that meeting--that was my coffee. Then I'll prep the meeting, and you know what, that's probably a Swedish company, so they'll come in 8am tomorrow into my office. And this day has been so full on, so maybe I should just get out of there, go to spinning class with my [inaudible].
But I want to talk a bit about just the investment process I run, and kind of how what we call the investments simulator fits into that. There's not an awful lot of emojis on the screen, so it's a bit harder maybe to comprehend. But what I want to talk about, and Venetia touched a bit upon it.
But if you think about the start of any investment process, it usually starts with valuation. And when I say valuation, I mean, what's the price of the stock today? And what is expected? What's the expected value of that stock that corresponds to that price? And that's the start of any investment.
And then you think, Okay, so the value of that stock that is quoted today--is that correct? Is there something there that I can research or think about, that makes me think that this company is actually worth a lot more or a lot less? So basically, that's when you start kind of thesis building.
And thesis building is basically the core of the research process. It's me saying, Netflix is trading at 450 USD, do I think it's worth that? Do I actually think this whole password thing is actually going to work out really great for them? And they're gonna bust all you guys for sharing, and they're gonna earn more money, and they're gonna be more valuable? Maybe, right?
And how I can kind of go about that is I can talk to the company. I can talk to experts who've--maybe people who worked at Netflix before come and talk to me about it. I can actually go out and talk to people who use Netflix. That's actually quite a lot of fun, because Netflix is something everyone uses. And everyone can tell me about how annoying the whole password thing has been lately. But then again, I can also understand that you can't share anymore, so that actually--they will learn more money.
All these things kind of makes me determine whether it is worth more money and I should buy. Say I decide to buy Netflix on the back of this whole password sharing thing. Then I go into what I would consider execution phase. And that's kind of where what we call the investment simulator comes in.
So execution phase for me is when I put Steffie buys $440mn of Netflix into my trading system. When I put that into the trading system, the investment simulator will have accumulated a lot of data of how I've traded previously. So it will sometimes feed stuff back to me saying, You've been really poor at trading Netflix before, or Netflix consensus number isn't actually going up, or it will tell me lots of different stuff that will pop up on the screen.
You can--this could be a reaction to what I've been trying to explain to you. If it is, I just wanna show you what the investment simulator on my trading system looks like. So basically, we have what we call the simulation.
That's--this is not my portfolio, by the way. I don't trade Nintendo and Ubisoft. But this would be the companies in my portfolio. I would have different weights on them. And then for example, I would put in a trade, I would say, Oh, let's buy 3% of my portfolio in PayPal, great company. And then before I actually click buy or sell, I will get these signals up there.
So the market signals, there will be data that the investment simulator drags in from markets. So it will be--is there a high or low short interest? Is there a lot of investors who don't believe in this company and have been shorting it? That's a good thing for me to know. The best part is still the PM signals.
Again, Venetia might have touched upon the bias as part of the whole puzzle--this is where it tells me that I have biases. And obviously, it's very hard to tell yourself your biases. So if a data or a machine does it for you, that is quite good.
So again, it can tell me--maybe I'm not particularly good at what we call off benchmark positions, maybe--so if I'm not, maybe I should think about that. Maybe I'm particularly good at big orders, small orders. Maybe I'm particularly good at buying companies when I've had a meeting with them, which is data we can get, because obviously they know when I've had a meeting and they know if I sold or bought after that meeting.
Again, if this makes no sense to you, which I could totally understand, because it looks very confusing, and I have tons of financial words up there, you're very welcome to come and find me, and we can have a chat about it. Thank you.
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Wrap-up
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