Norway Wealth Fund Private Equity Push Held up by Government

Stephen Treloar
·3 min read

(Bloomberg) -- Norway’s government took a timeout on a decision whether to permit its $1.6 trillion wealth fund to invest in private equity.

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The decision on whether to allow the asset manager to branch out into private equity will be considered by a permanent expert council, to be established this year, the finance department said Friday. Appointees have yet to be decided.

The move means more waiting for the wealth fund, which owns about 1.5% of listed stocks globally, to seek returns from the private sphere. It’s asked the ministry numerous times — most recently in 2018 — to consider adding unlisted companies to its existing portfolio of stocks, bonds, real estate and renewable energy infrastructure.

“The government does not wish to open for unlisted equities now,” Finance Minister Trygve Slagsvold Vedum said in the statement. “This is an important decision, and we must allow time to consider it carefully.”

Previous governments have declined to let the fund in on the global private equity market, citing concerns about transparency and management costs, but last year, the current government asked the central bank to look at unlisted equities again.

“The mandate of the fund is underpinned by broad political consensus,” Karin Thorburn, a Norwegian School of Economics professor who has served on numerous committees related to the fund’s investment strategy. “Using government money on the high fees associated with private equity is hard to stomach for most Norwegian politicians.”

Read More: Norway’s Wealth Fund Recommends Adding Private Equity

Chief Executive Officer Nicolai Tangen sees the potential addition to the fund’s investment universe as a catalyst, similar to when Norges Bank Investment Management increased the proportion of equities during the financial crisis, he told reporters in November when recommending adding the asset class.

Tangen started at the fund in 2020 for a term of five years, so a longer wait will limit the time he has to oversee the introduction of private equity, should his term not be extended.

The fund said in an email Friday that it is “positive” that the department is considering the question more closely and that representatives will appear before the finance committee later this month to answer questions on the subject.

If given the green light, the fund would aim to gradually build up a portfolio of unlisted equity assets and would seek to limit expected relative volatility to avoid increasing equity market risk. Between 10 and 15 people would need to be hired to manage the portfolio initially, rising to as many as 30 over time.

The ministry also proposed starting annual withdrawals from its seperate domestic pension fund, managed by Folketrygdfondet, in order to prevent its ownership in Oslo-listed companies exceeding a 15% cap. The sovereign wealth fund, which is managed by NBIM, isn’t allowed to invest in Norwegian equities.

--With assistance from Kari Lundgren and Ott Ummelas.

(Updates with comment from wealth fund in sixth paragraph.)

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