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Sovereign Wealth Funds

Norway’s Norges Bank wants to exclude oil and gas stocks at $1 trillion sovereign wealth fund

Oil and gas stocks should be removed from the benchmark index of the Government Pension Fund Global, Oslo, said the manager of the sovereign wealth fund's assets.

Norges Bank Investment Management runs the assets of the 8 trillion Norwegian kroner ($983 billion) GPFG. In a letter to the Norwegian Ministry of Finance, Norges Bank concluded that "the vulnerability of government wealth to a permanent drop in oil and gas prices will be reduced if the fund is not invested in oil and gas stocks," and advised the removal from the benchmark index. The fund's investments are measured against custom benchmark indexes for stocks and bonds compiled by FTSE Group and Bloomberg, respectively, on behalf of the Ministry of Finance, said the fund's website.

Oil and gas equities account for about 6%, or 300 billion kroner, of the sovereign wealth fund's benchmark index, said Norges Bank. Analysis taking this exposure, as well as the Norwegian government's 67% stake in energy company Statoil and future government oil and gas revenue, result in a total exposure to oil and gas equities for the government that is twice as large as in a broad global equity index, said the letter. The stake in Statoil could not be learned by press time.

The Ministry of Finance has, on a regular basis, transferred capital to the fund from the Norway's petroleum revenues.

A separate news release by the Norwegian Ministry of Finance, quoting Finance Minister Siv Jensen, said the issues raised by Norges Bank are "complex and multifaceted," requiring a "thorough assessment, in line with established practice for key decisions on the management of the fund. Furthermore, the government is responsible for the Norwegian economy as a whole and must take a broad and comprehensive approach to this issue."

The ministry will obtain further information and notify Parliament about the ongoing report on the management of the Government Pension Fund, which will be submitted in the spring. "The government aims to conclude on this matter in the fall of 2018," added the release.