Norway official sees more diversification for sovereign wealth fund

Oeystein Olsen
Oeystein Olsen

Norway’s central bank governor said it would be natural for the 4.921 trillion kroner ($811.5 billion) Government Pension Fund Global to expand the asset classes in which it invests, as the new government considers how best to deal with the fund’s growth.

Oeystein Olsen, the governor, signaled support for a 2010 recommendation, which was rejected the following year, for the fund to invest in infrastructure and private equity as the new administration of Prime Minister Erna Solberg reviews its investment mandate.

Growth in the Oslo-based sovereign wealth fund, into which Norway channels most of its income from oil and gas, is already creating investment hurdles, said Petter Johnsen, chief investment officer for equities, on Nov. 1. The fund has more than quadrupled since 2005 and will grow to 5.34 trillion kroner by the end of next year, the government estimates. The fund in 2010 was allowed to invest 5% in real estate, expanding from just placing money in bonds and stocks.

“We’ve achieved this 5% share in real estate and we’re working with filling that gap,” Mr. Olsen said Tuesday in an interview in Oslo. “Right now there are no immediate plans of making new requests, but when the fund expands, the signal that was given by Norges Bank in 2010 was quite natural.”

The Norwegian government releases a white paper on the fund’s management each year to parliament, usually in April, where it outlines any changes to the fund’s strategy.

Finance Minister Siv Jensen in an interview last week scaled back talk of restructuring the fund as a way to deal with its size, a model that Ms. Solberg had discussed before the September elections. The government aims “at a predictable and stable investment strategy for the fund,” Mr. Jensen said. “If we receive any recommendations from the fund, we will consider them carefully and we will evaluate if we think it is necessary to make any changes.”

The fund is mandated to hold about 60% in equities, 35% in bonds and 5% in real estate. Yngve Slyngstad, CEO of Norges Bank Investment Management, which oversees the fund, said last month he’s no longer using new inflows to buy more stocks, which he said were headed for a “correction.” The fund returned 5% in the third quarter.