Norway’s sovereign fund best global investment bet

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Picture Credit: Video grab of the minister of finance of Norway
 
Norway’s sovereign fund is the world’s best investment bet according to an expert.

The book author, Clemens Bomsdorf, said the fund has lessons for retail investors, adding that they should think long-term and shouldn’t sell when stocks markets go down.

 

Picture Credit: Government Pension Fund of Norway

Invest in the fund

For Clemens Bomsdorf, a financial journalist who has worked for the Wall Street Journal, Die Zeit and Focus, there were lessons that retail investors could learn from, Reuters reported.

“For the average investor, the fund is a very good blueprint.”

“What strikes me … about the Norwegian wealth fund is that many countries have been rich because of oil. But they have squandered the riches whereas Norway has not,” the 41-year-old told Reuters.

The wealth fund raked in a return of around 1.028 trillion kroner, or $131 billion, in 2017 thanks to global stock market rallies.

This lets its profits swell to around one-third of its home country’s gross domestic product in 2017.

No Private Equity Investment!

Norway’s finance minister Siv Jensen said no to plans by the country’s $1 trillion sovereign wealth fund to invest in private equity.

On April 10, the fund’s request to invest in private equity – a request made through Norwegian central bank which manages it – was turned down.

It is the world’s largest sovereign wealth fund and the minister of finance cited cost and lack of transparency as reasons for the decline of the request.

Norway’s central bank had asked to be permitted to invest in unlisted companies because of the possibility of higher returns.

The finance ministry announced its recommendation in its annual white book on the country’s pension funds, said local newspapers in Norway.

“This is purely and simply because of the fact that we care about the fund’s image… especially when it comes to transparency,” she told reporters.

The fund (visit its website here), valued at 8.48 billion kroner (almost 880 billion euros or $1.08 trillion) at the end of 2017, was at the time invested in stocks (65.9 percent of the portfolio), bonds (31.6 percent) and real estate (2.5 percent).

The government also reiterated its opposition to allowing the fund to invest in unlisted infrastructure.

But it did leave the door open to investments in unlisted renewable energy infrastructure, such as wind and solar energy farms.

The government is continuing to deliberate on whether it should allow the sovereign wealth fund to increase its allocation to equity to 70% from 66.6%.