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Norway’s Government Pension Fund Global weighs expanding into infrastructure

Norway moved a step closer to deciding whether its sovereign wealth fund will be allowed to broaden its investments to include infrastructure as part of a strategy to increase returns.

The government will ask the Oslo-based $870 billion Government Pension Fund Global's strategy council to assess whether it should invest in unlisted infrastructure, the Finance Ministry said Tuesday. It will also look into raising the 5% cap on real estate investments.

“There are challenges to entering infrastructure,” Paal Bjoernestad, a state secretary at the ministry, said Tuesday in a telephone interview. “We need to balance that against the possibility of spreading risk.”

The government has so far hesitated to let the fund expand into unlisted investments such as infrastructure and private equity. The previous administration in 2011 rejected the strategy council's recommendation to allow such a move, citing “limited historical returns” on the asset class.

The fund is mandated by the government to hold about 60% in stocks, 35% in debt and 5% in real estate. The investor, which gets its capital from Norway's oil and gas wealth, has been lobbying to be allowed to move into new assets such as private equity to boost returns.

The government said that while private equity also has “been considered,” it would assess investing in that at a “later stage,” Mr. Bjoernestad said.

Since the establishment of Norges Bank Investment Management in 1998, the unit inside the central bank that runs the fund, it has had a real annual return of 3.7% and a nominal return of 5.75%, on average.

The central bank will provide advice on the merits of investing in infrastructure if approached by the Finance Ministry, Norges Bank spokeswoman Hilde Singsaas said in an e-mail. “We have no further comments at this time.”