Norway’s sovereign wealth fund — the world’s largest, valued at $1.8 trillion — is turning to artificial intelligence (AI) to slash annual trading expenses by nearly $400 million.
The initiative marks one of the boldest moves by a major institutional investor to leverage AI in order to streamline trading and improve efficiency in global markets.
AI to Save One-Fifth of Annual Trading Costs
Chief Executive Nicolai Tangen confirmed that the fund already saved $100 million since launching the project two years ago. The goal is to cut trading costs by 20%, reducing annual expenses from $2 billion to $1.6 billion.
“We have AI programs that predict our buying and selling flows. The goal is to save $400mn in trading costs a year — it’s huge numbers,” Tangen explained.
The savings come from two strategies:
- Trading less frequently by avoiding unnecessary transactions triggered by index changes.
- Trading smarter through improved timing, internal order handling, and reduced reliance on external intermediaries.
Scale of Operations: 46 Million Trades Per Year
The Norwegian oil fund is a heavyweight in global equity markets:
- Owns 1.5% of every listed company worldwide on average.
- Executes more than 46 million trades annually.
- By internalizing more of these trades, it lowers both transaction costs and price slippage.
Industry Trend: AI in Asset Management
According to a survey by Mercer, 9 in 10 investment managers already use or plan to adopt AI. Among them:
- 66% cited cost reduction as the main driver.
- Early adopters include Wall Street trading firms such as Citadel Securities, Tower Research, and Hudson River Trading.
While hedge funds and market-makers embraced machine learning early, large institutional investors like Norway’s oil fund have been slower to deploy it at scale. This shift could reshape the competitive landscape — potentially reducing profits for banks and trading intermediaries.
Leadership and Future Outlook
Tangen, reappointed for a second five-year term, emphasized that cultural change is key to embedding AI across the organization.
“To implement AI fully, you need leadership obsessed with it, and a workforce that is IT-literate and able to program,” he said.
The fund’s long-term aim is to balance cost efficiency with smarter execution, setting a precedent for other sovereign wealth funds and pension giants worldwide.
Key Takeaways
- $400M annual savings goal through AI-driven trading.
- $100M already saved since the initiative began two years ago.
- Handles 46M trades per year, owning stakes in nearly every listed company.
- AI adoption in asset management could reduce Wall Street profits from trading commissions.
