Norway’s Government Pension Fund-Global, Oslo, proposed to add infrastructure and private equity investments to increase and safeguard returns on the money the 2.79 trillion Norwegian kroner ($480 billion) fund manages for future generations.
“The fund is well suited to harvesting the liquidity premium from such investments, as the fund has no short-term liquidity needs,” the fund said in a letter released Tuesday with Norway’s 2011 budget.
The sovereign wealth fund proposed a new structure for its investments, adding a third category including infrastructure projects, inflation-linked bonds and real estate to complement its listed stocks and bonds. It also proposed to market weight its stock investments, meaning it would need to increase U.S. and Asian stockholdings at the expense of European shares.
The Finance Ministry said it formed a council with external members that will present an evaluation of the fund’s strategy no later than Dec. 1. Elroy Dimson, an emeritus professor at the London Business School, will head the group. The government said it would comment on the proposals in the letter and the conclusions of the council in the spring.
The fund is currently required by the state to allocate 60% of its assets in stocks, 35% in bonds and as much as 5% in property investments. The new category of investments, called “other real assets,” would come at the expense of the allocations to fixed-income securities, according to the letter. A potential increase in investments in unlisted shares would be part of its 60% holding in stocks.
“Investments in private equity would represent real assets through ownership of the underlying production capacity at the unlisted portfolio companies,” the fund said. “As a result, any investments in private equity by the fund would be part of the asset class of equity investments.”