Norway’s sovereign wealth fund says it must prepare for ‘large fluctuations’ in its value
Norway’s $1.1 trillion (£8.99bn) sovereign wealth fund must be prepared for “large fluctuations” in the value of its portfolio, its managers said.
The world’s largest sovereign wealth fund will also consider investing in companies before they go public, said Norges Bank Investment Management (NBIM) in a report outlining the fund’s strategy for the next three years.
Read more: Norway considers shifting sovereign wealth fund away from Europe
“Trends and disruptions in the global economy such as increased trade barriers, low global interest rates, changing technology paradigms and climate change will affect the fund,” the report said. “We should be prepared for large fluctuations in the value.”
NBIM said the proposed shift towards investing in firms before they list was in response to “a change in market dynamics” in recent years as the number of new listings declined.
“Companies seem to stay private for longer. We will consider further investments in companies prior to their public listing,” NBIM said.
The fund will continue to hold around 70 per cent of its assets in global equities, in line with a mandate set by Norway’s parliament. The fund is currently invested in almost 70 different equity markets, and is entirely invested outside Norway.
The number of markets in the portfolio could decline as managers “continuously assess the rationale for investing in some of the smaller emerging markets”, the report said.
The top official responsible for the fund said in August that Norway was considering shifting its emphasis away from Europe as investor confidence in the region falters, but today’s report does not outline any specific plans to alter the geographic balance of its investments.
According to the report, the finance ministry will assess whether to shift the balance of the fund’s investments, but: “Any changes to the fund’s geographical composition will be implemented gradually.”
It emerged last week that the sovereign wealth fund would divest from companies solely dedicated to oil and gas exploration, but will continue to hold stakes in oil refiners and other firms involved in the industry.
Read more: Norway’s sovereign wealth fund to divest from fossil fuel investments
The decision to divest affects holdings in 95 companies totalling around 54 billion Norweigan crowns (£4.8bn) and represented a significant scaling back on previous divestment proposals.
Norway’s central bank had originally suggested the fund divest from all petroleum firms in 2017, but the government opposed a full ban on the holdings.