GPF

Norway's SWF - A risky strategy that locks in low returns

This piece is the latest salvo in my on-going public debate with Norway's Ministry of Finance, that lays out the investment strategy for its $750bn sovereign wealth fund, now the biggest in the world. It appears in today's Aftenposten in response to comments by the Deputy Minister of Finance in the same newspaper.  

Norway’s future is intimately linked to how well the GPF - its $750bn sovereign wealth fund, already 150% of GDP and rising - is run. Under the 4% spending rule, as much as 15% of all government spending already comes from the GPF. Hence, returns on GPF investments and the final size of the GPF are probably more important for Norway’s economy than any other single policy.  Yet, there is little scrutiny of the merits of the GPF’s investment strategy, which is deeply flawed.

Secretary Singsaas is correct to say that GPF strategy should be based on evidence and my report provides exactly the kind of analytical basis that is necessary to improve the present approach. She agrees that there is a financial case for the GPF to make more investments in the green economy and in developing countries, but suggests incremental actions that are too little too late. The central recommendations of my report are not addressed.

Investing for the Future - Norway's SWF needs to change

Re-Define has launched a major new report on the Norwegian Sovereign Wealth Fund, the largest in the world.  The report can be found here and the press release here

I still remember that feeling of surprise when I first looked at Norway's Sovereign Wealth Fund (GPF), now the world's largest, in 2007. Having worked both in the financial industry and in public policy, I was struck by three observations in particular. They still make me uneasy.

The first was how the portfolio, in 2007, was comprised almost entirely of investments in liquid securities in the developed world. These still constitute more than 90% of the GPF. The second was how some of the largest investments of the GPF were in oil companies. Even today, three of the ten largest equity holdings of the GPF today are in oil majors and as much as 10%-15% of the overall portfolio is heavily exposed to oil, gas or coal. The third was the laid-back approach the GPF took to engaging on matters of governance, policy and ethical guidelines, which has not changed.