Expensive limitations on the Norwegian Sovereign Wealth Fund

It is surreal to see the Ministry of Finance, yet again, veto Oil Fund investments in private equity (unlisted funds) and unlisted infrastructure in its white paper on the Fund. This decision makes no financial sense. Not only does this reduce profits from the fund, it also increases the risk of large losses and the negative impact these would have on the welfare state. A large, long-term, universal investor such as the Oil Fund should be exposed to the entire world economy. However, listed firms represent a shrinking part of the global economy.

Euro-Zone Reform Proposals Don't Go Far Enough

Large bank failures in recent years have led to reforms that strengthen crisis prevention and give regulators and banks the tools for dealing with crises that do occur. Similar policy measures can be helpful in dealing with sovereign crises -- when governments run out of money and credit. Unfortunately, the European Commission misses the mark in its recent proposals to upgrade the euro zone’s sovereign crisis management system.

Sovereigns, like banks, can get into trouble. Some of the same prevention and treatment rules should apply.

Europe's Sovereign-Bank 'Doom Loop' Can't Be Broken

Ever since the financial crisis, the European Union has grappled with how to solve the so-called sovereign bank doom loop -- the phenomenon whereby weak banks can destabilize governments that support them and over-indebted governments can push banks holding their bonds over the precipice. The widely touted solution is the European Banking Union, which the European Commission wants completed by 2018. New rules introduced European bank supervision, a new resolution framework that limits sovereign support and a pan-EU deposit insurance scheme as a means of breaking the interdependence between banks and sovereigns.

How Not to Run a Sovereign Wealth Fund

Norway’s $1 trillion sovereign wealth fund, which recently announced its intention to remove all oil and gas stocks from its benchmark, has the potential to be the world’s pre-eminent investor. It enjoys more freedom than any other investor in the world, at least on paper. So why is it such a performance laggard, trailing the best-in-class sovereign wealth funds and pension funds it should be leading? The answer offers a cautionary tale to other sovereign funds and pension funds.  

No, Norway Isn't Turning Away from Fossil Fuels

There was widespread excitement last week on the news that Norway’s $1 trillion sovereign wealth fund has announced an intention to sell off its oil and gas holdings. This amounts to about 6 percent of the fund’s stockholdings, about $37 billion. Environmental activists, in particular, are delighted and expect this to trigger a broader sell-off in fossil fuels. They should hold the champagne. The wealth fund's decision to divest oil and gas assets was more about diversification than environmentalism.

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