A Norway with Two Sovereign Wealth Funds
Posted on 08/06/2013
Norwegian elections are creeping up in what could impact the realm of sovereign wealth funds. Norway’s Conservative Party leader Erna Solberg has a chance of winning as polls suggest the opposition may win parliamentary elections. Politicians often develop economic policies; Erna Solberg seeks to fully review Norway’s Government Pension Fund Global (GPFG) if she wins. One floated idea is splitting up Norway’s sovereign wealth fund. Conservative politicians in Norway contend creating competition among domestic public funds is a good thing. In fact, many countries have more than one sovereign wealth fund or major public pension investor – examples include China, Singapore (GIC and Temasek Holdings), and the Gulf countries. Each sovereign fund could have a separate purpose or goal.
It is competition of public fund performance versus economies of scale.
The ruling party argues that splitting the fund to increase competition would increase risk taking that would focus on short-term results. Splitting the mega fund would increase administrative costs in the aggregate. Not to mention, many policymakers globally look up to Norway’s sovereign fund as a model. Norway’s GPFG operates a relatively low-cost operation compared to other pension investors. 2012 was the sovereign fund’s number #2 year. The fund also made substantial changes in their bond policy and increased diversification out of Europe.
A third way would be to allow Norway’s sovereign wealth fund to invest in other asset classes like infrastructure and renewable energy (preference of Norway’s Progress Party).
Keywords: Norway Government Pension Fund Global, GIC Private Limited.
