- Advertisement -
- Advertisement -

Norway’s SPU Wealth Fund Urged to Increase Equity Share to 75%

- Advertisement -

Stockholm (HedgeNordic) – Norway’s Central Bank last week proposed to increase the amount that the Norwegian sovereign wealth fund, the Government Pension Fund Global (Statens Pensjonsfund Utland – SPU), invests in equities.

The fund (formerly the Petroleum Fund) invests Norway’s excess oil revenues in international stocks and bonds on behalf of the country’s future pensioners and, with an average holding of 1% in equities worldwide, is the world’s largest sovereign wealth fund by assets, currently valued at USD 859 billion.

The Central Bank, whose subsidiary NBIM (Norges Bank Investment Management) manages the fund, has concluded that stocks offer greater potential returns than bonds.

“In February, Norges Bank was requested to assess whether the relationship between expected return and risk for equities and bonds has changed and whether there is a reason to adjust the equity share in the fund’s benchmark index,” Egil Matsen, Deputy Governor of Norges Bank, said last Thursday in Oslo. This assessment found that investment-grade bonds have fallen sharply, while expected returns on equities over bonds are now projected to be at a higher level than at the previous assessment of equity allocation.

“Norges Bank submitted its advice to the Ministry of Finance… recommending an increase in the equity share to 75%,” Mr. Matsen said. A higher equity allocation means the expected return on the fund will increase, the bank said.

Previously wholly invested in government bonds, the investment portfolio first included equities in 1998, with the strategic equity share set at 40%. This level was increased to 60% in 2007. The fund has been composed of 60% equities and up to 5% real estate, with the remainder in bonds, since 2010.

“There is reduced covariance between bond and equity returns. In short, bonds have become a better, but also more costly, hedge against fluctuations in the fund’s value. Both of these factors suggest that some increase in the equity allocation would be appropriate,” Mr. Matsen said.

 

Picture: (c) shutterstock.com—Ioannis-Pantzi

close

Subscribe to HedgeBrev, HedgeNordic’s weekly newsletter, and never miss the latest news!

Our newsletter is sent once a week, every Friday.

Glenn Leaper, PhD
Glenn Leaper, PhD
Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

Latest

Most Popular This Week

Voices

Request for Proposal

- Advertisement -

Latest Articles

RFP: Absolute Return Multi-Strategy/Fund of Funds

(Global Fund Search) - A Danish Institutional Investor is searching for an absolute return strategy for an allocation of EUR 40 million. The mandate...

Brummer Multi-Strategy Navigates 2022’s “Perfect” Storm

Stockholm (HedgeNordic) – 2022 experienced a “perfect” inflation storm due to an unprecedented amount of monetary and fiscal policy stimulus during the pandemic, war,...

Dream Comes True for Grönblom

Stockholm (HedgeNordic) – Ernst Grönblom had been running his high-conviction strategy of cherry-picking the stock market’s undervalued future winners under the umbrella of United...

Boarding the Broader Alternatives Ship

Stockholm (HedgeNordic) – Tore Davidsen, portfolio manager of SEB Eureka Fixed Income Relative Value since its launch in 2018, will join BankInvest as Senior...

Year of Stabilization of Interest Rates

By Kari Vatanen, CIO of Veritas: The year 2022 was a year of negative surprises in the investment markets and in the global economy. Hopes...

Playing Offense in the Net-Zero Transition

Stockholm (HedgeNordic) – The world’s adoption of cleaner energy had been ongoing prior to Russia unleashing war in Ukraine. The war and its consequences...