Norway's USD800 billion wealth fund should invest in private equity and infrastructure - central bank governor

By Rizza Sta. Ana

Nov 27, 2013 05:21 AM EST

Norway central bank Governor Oeystein Olsen was quoted as saying that it was natural for the state to expand its asset class investments. Norway currently has a massive USD800 million sovereign wealth fund as a new government mulls over how to manage its fund's growth.

Olsen was one of the signatories in a 2010 recommendation for Norway to invest in private equity and infrastructure. The recommendation was later on rejected the succeeding year. According to a Bloomberg report, Norway's new administration under Prime Minister Erna Solberg is set to review the fund's investment mandate.

On November 1, Chief Investment Officer for Equities Petter Johnsen said the growth of the wealth fund had created investment hurdles for the state. Norway's wealth fund staples are in oil and gas. Since 2005, the government estimated that the wealth fund grew more than quadrupled and will reach DKK5.34 trillion or USD875 billion by 2014 year-end. In 2010, the wealth fund was allowed to allocate 5% of the fund amount for real estate investments, a considerable offshoot to the normal investments of bonds and stocks.

In an interview in Oslo, Olsen said yesterday, "We've achieved this 5 percent share in real estate and we're working with filling that gap. Right now there are no immediate plans of making new requests but when the fund expands, the signal that was given by Norges Bank in 2010 was quite natural."

Finance Minister Siv Jensen said on November 19 about the fund's restructuring, "(The government aims) at a predictable and stable investment strategy for the fund," Jensen said on Nov. 19. If we receive any recommendations from the fund, we will consider them carefully and we will evaluate if we think it is necessary to make any changes."

Bloomberg said in its report that Norway's wealth fund mandate allocates 60% in equity investments, 35% in bonds and 5% in real estate. In the third quarter, the wealth fund recorded a 5% return, which was at DKK228 billion.

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