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Committee recommends increasing Norway sovereign wealth fund’s equity allocation

Norwegian Kroners

Norway's Government Pension Fund Global, Oslo, should increase its exposure to equities to 70% from 60%, concluded a government-appointed committee.

The Norwegian government announced in January that it had appointed a committee to assess the equity portion of the 7.119 trillion Norwegian kroner ($865 billion) sovereign wealth fund.

The committee was asked to analyze the expected risk and return in the fund with different equity allocations, and to assess whether any change in the equity portion would have an effect on elements such as the composition of benchmark indexes for stocks and bonds.

The majority of the committee recommended an increase in equities allocation to 70%. The minority of the committee — including Knut Anton Mork, senior economist and adjunct professor at the Norwegian University of Science and Technology, and chairman of the committee — recommended dropping the sovereign wealth fund's equities allocation to 50%.

The main conclusions of the committee include that a higher proportion of equities will increase the expected return of the fund. The fund currently has an allocation of 60.6% equities, 36.3% fixed income, and 3.1% real estate.

The committee's report has been submitted to Norway's Ministry of Finance.