Norges Bank has recommended that Norway's sovereign wealth fund, Government Pension Fund Global, Oslo, increase its exposure to North American equities, Norway's central bank said in a response to a letter from Norway's Ministry of Finance.
Aimed at adjusting geographical distribution toward float-adjusted market weights to capitalize on stronger returns, Norges Bank suggested increasing the weight of North American equities and reducing the weight of European developed market equities in GPFG's portfolio.
The sovereign wealth fund's exposure to North America has risen to 41% from 35% since 2012. Exposure to European equities has fallen to 34% from 38%.
In the second quarter of 2019, the 9.16 trillion Norwegian kroner ($1.03 trillion) GPFG had the biggest gain from North American stocks, which returned 3.6%.
U.S. stocks, the sovereign wealth fund's single largest market allocation at 39.6%, also gained 3.6%. By comparison, European stocks returned 4.1%; U.K. equities added 0.9%; and Asian and Oceanian equities returned a combined -0.1%.
Kjetil Storesletten, executive board member of Norges Bank said in the Aug. 21 response: "The very reason why Norway set up the oil fund was a broad view of national wealth, and it was this perspective that was behind the committee's advice on the equity share. This perspective indicates that higher weights should be assigned to countries and markets with a lower correlation with Norwegian government revenue and Norwegian economic output, and lower weights to countries and markets that move more closely in line with Norwegian income."
