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Is There Growing Politicization of Norway’s Sovereign Fund?

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Norway has been able to amass tremendous financial wealth from petroleum revenue over the past fifteen years. The wealth fund commands attention from policymakers, asset managers and the citizens of Norway. Thus, Norway’s Government Pension Fund Global (GPFG), the ex-Norway part of oil-derived assets, wields significant influence when it comes to corporate governance and investment policy. For example, allocation to renewable and environmental strategies gained further traction in 2009, amid pressure from Norwegian politicians. During that period, Norway’s sovereign fund awarded mandates to a number of external managers in environmental-related mandates. By 2014, Norges Bank Investment Management (NBIM) established their first portfolio dedicated to green bonds, in which the reference portfolio is based on a sub-segment of the Barclays MSCI Green Bond Indices. In parallel, NBIM has excluded a number of companies from its portfolio based on recommendations from its Council on Ethics which was established by Norwegian royal decree in November 2004. Divested companies were in violation of areas such as excessive greenhouse gas emissions (cement companies, oil sands firms, and coal-fired plants), deforestation, water issues and corruption. These inclusionary and exclusionary investment policies, so far, have had a negligible impact on the fund’s growth and performance, while signaling to the capital markets their beliefs on how companies should be properly managed.

Norway’s wealth assets are at an inflection point.

Political Parties Have Different Dreams of Norway’s Sovereign Wealth Assets

With that being said, there has been talk by Norwegian politicians of dividing up Norway’s massive pile of sovereign wealth into mission-driven funds. Norway’s ruling Conservative Party publicly agreed to this idea. Norway’s Green Party has been able to sway the country’s parliament to force the wealth fund to divest from coal investments, while advocating the wealth fund partake in large-scale renewable investments. There is also talk of more investment into infrastructure. The biggest news driver is Norway’s own economy, in which the key policy rate was lowered from 0.75% to 0.5%, while the Norges Bank Governor warned the fund will withdraw some assets.

Dag Dyrdal from Montalban AS penned a paper in Internasjonal Politikk titled, “Tverrpolitisk pensjonskasse eller aktivt politisk verktøy?” It essentially translates in English to Bi-partisan Pension Fund or Active Political Tool? Dyrdal in his paper praises past Norwegian politicians on keeping up with the fiscal rule, even during tough times in 2007 and 2008. Dyrdal concludes that the wealth fund has achieved success based on broad consensus from Norway’s parliament, but also limited politicization of the wealth fund, at home and abroad.

Norway’s wealth assets are at an inflection point. With increasing external pressures from prolonged low oil prices, currency turmoil, and a weakened domestic economy, Norway will have to decide how much capital from the fund they will want to tap to achieve their goals.

SWFI First Read, September 21, 2018

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U.S. Public Becomes More Aware that Gmail Scans Emails

Alphabet is a major stock holding for sovereign wealth funds and large pensions. Search giant Google is under fire for allowing third-party partners and companies, like Return Path Inc and other advertisers, to share data from Gmail accounts. Many experts and tech observers already knew this, but more people in the public are becoming aware of Google’s practices when it comes to privacy. Google disclosed in a letter to U.S. lawmakers this finding. The Wall Street Journal reported that in some instances, app companies were able to read people’s emails in order to improve their algorithms. In 2017, Google said they would stop scanning all of one’s Gmail messages for the goal of personalized ads.

GPIF Infrastructure Exposure Almost Reached 200 Billion Yen in March 2018

Japan Government Pension Investment Fund’s (GPIF) exposure to infrastructure real estate was 196.8 billion JPY at the end of March 2018. At that period, 57% of the exposure was to the UK, 15% was to Australia, 15% to Sweden, 10% to Spain and 3% to Finland. 21% of GPIF’s infrastructure portfolio was linked to airports versus 27% to ports.

AIMCo-backed sPower Closes $498.7 Million Bond Deal

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Iceland Contemplates a Sovereign Wealth Fund

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The Government of Iceland is looking to possibly form a sovereign wealth fund to stabilize the country from unforeseen shocks to the national economy. The Iceland government released a statement saying, “The state’s contributions to the Fund will be equivalent to new revenues from publicly owned power production companies which are expected to accrue in the coming years.”

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CBRE Global Wins First GPIF Global Real Estate Mandate

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Japan Government Pension Investment Fund (GPIF) awarded its first global real estate mandate by hiring CBRE Global Investment Partners Limited. This is a global core real estate fund-of-funds separate account. Overseeing this mandate as a gatekeeper is Asset Management One Co., Ltd., which is a unit of Mizuho Financial Group. This RFP was launched in April 2017.

CBRE Global Investment Partners is the multi-manager arm of CBRE Global Investors.

In addition, on August 8, 2018, GPIF hired two custodians for short-term investments. These custodians are Trust & Custody Services Bank, Ltd and The Master Trust Bank of Japan, Ltd.

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