In tough times, Nobel prize to feel further pinches

STOCKHOLM Tue Dec 4, 2012 1:25am IST

A general view of the Nobel banquet at Stockholm's City Hall, December 10, 2010. REUTERS/Pawel Kopczynski

A general view of the Nobel banquet at Stockholm's City Hall, December 10, 2010.

Credit: Reuters/Pawel Kopczynski

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STOCKHOLM (Reuters) - The Nobel Foundation will cut more costs and try to boost returns from its investments after the global downturn forced it to reduce its prize money by 20 percent this year.

The Nobel Foundation, one of the world's most prestigious institutions, made waves earlier this year when it cut its prizes to 8 million crowns after a decade of costs over-running its income from investments.

"I expect that it will stay on this level now for quite a while," Nobel Foundation Executive Director Lars Heikensten told Reuters in an interview on the eve of a week of ceremonies and banquets associated with the prize.

"I don't think we should take it up and down every year depending on circumstances," said Heikensten, a former Swedish central bank chief, adding the prize could be frozen at its current nominal amount for several years.

The drive to conserve capital has already meant renegotiating deals from suppliers such as airlines, restaurants and hotels ahead of this week's ceremonies. Organisers have even cut the number of cars ferrying guests around Stockholm.

For more than a century the foundation has managed the roughly $450 million capital that forms the base for the awards, given for excellence in the fields of science, literature and peace and donated in the will of dynamite inventor Alfred Nobel.

But in recent years it has faced tougher times.

"It is not at all a crisis," Heikensten said. "But we felt that we should do something about it."

The foundation has brought in outside advisers to help with investment decisions while looking to cut spending across the organisation.

"It's a sort of restructuring process," Heikensten said. "It has gone reasonably well. We will need to push back a little bit more next year as well I think, but we have come some ways."

Looking beyond cost cuts, the foundation is seeking to bolster investment returns that have averaged 1.5 to 2 percent over the past 10 years, roughly half as much as its spending in the same period.

Last year the market value of the foundation's invested capital fell 2.6 percent to 2.97 billion crowns as a 9 percent drop in returns from its equities investments overshadowed better performance by its other assets.

To stem the tide it has brought in well-known Swedish names as advisers such as Sven Nyman, co-founder of independent fund manager Rational Asset Management, and Kent Janer, a senior manager of the Nektar hedge fund.

"It's a good group," Heikensten said. "Now the test is to make this group work."

The fund, which invests in both hedge funds and cheaper index funds, is also setting up benchmarks against which it can gauge its performance in comparison to similar institutions as well as different asset types.

But boosting the foundation's economy may also mean seeking out more sponsorships to increase revenues and ensure the Nobel brand becomes better known in Asian markets such as China.

"I think there is great potential here, and these are good things. If it can encourage a lot of small kids in China to go into science that is really important," Heikensten said.

"We are certainly not going to take risks with the trade mark. At the same time one has to realise that always when you collaborate with someone you take a certain risk." (Editing by Jon Hemming)

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