Norway’s sovereign wealth fund edges nearer to private equity investments

Government Pension Fund Global

The world’s largest sovereign wealth fund, Norway’s €875bn Government Pension Fund Global, is one step closer to investing in private equity.

Norges Bank, manager of the fund, this week recommended to the Norwegian government that the fund expand its remit into unlisted equities.

No decision has been made yet but should the recommendations be approved, Norges Bank said that “investing in and alongside private equity funds would appear to be the most relevant options”.

The fund manager noted that a four per cent allocation would be in line with Norway’s average stake in companies in its benchmark index. This would equate to an unlisted allocation of around €35bn.

Norges also suggested that allocations be made in areas that would have “positive knock-on effects” for the fund, highlighting venture capital and environmental-related investments.

Norges Bank recommended investing in unlisted equity as far back as 2010, but the move has been met with resistance. However, Norges feels the fund is now more adequately equipped to handle the operational demands of an expanded investment strategy, and that improved data highlighting private equity’s outperformance of stock markets has strengthened its case.

The Government Pension Fund Global currently invests in 1.3 per cent of all listed companies worldwide.