September 11, 2017 Read More →

Norway Pension Fund Managers Resist Diversifying

Bloomberg News:

The world’s biggest sovereign fund says expanding into new asset classes is now hardly worth the effort.

That means the opportunities for raising returns that Norway’s wealth fund once saw in infrastructure and private equity (and spent years trying to get political approval to buy) no longer exist, according to Yngve Slyngstad, the chief executive officer of the investor.

“Today we’re close to $1 trillion. Realistically speaking, whether we should invest in infrastructure, private equity or the likes isn’t a very important question for the fund,” Slyngstad said in an Aug. 29 interview at his office in Oslo. “It would be such a small proportion, and the duration of implementation would be so long, that if it were to have an impact on returns, it would in reality be if the fund was going down in size.”

The comments offer a surprising twist to a process in which Norwegian governments have explored the merits of letting the wealth fund expand beyond stocks, bonds and real estate. The investor had argued that adding more asset classes offered a path to higher returns after years of record-low interest rates.

Meanwhile, several think tanks and non-governmental groups have been urging the fund to start investing in infrastructure. The Norwegian government has so far said no, on the grounds that infrastructure investing risks pushing the fund into politically sensitive territory, with many projects being public works.

In a report presented to Norwegian lawmakers earlier this year, the Institute for Energy Economics and Financial analysis argued the fund should be freed to invest 5 percent of its capital in unlisted infrastructure, and especially renewable-energy assets.

“Unlisted infrastructure offers attractive returns for the risk incurred in a growing market,” Tom Sanzillo, the author of the report, said in emailed comments on Thursday.

More: World’s Biggest Wealth Fund Loses Taste for New Assets

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