Norway’s opposition consider oil fund split; Conservatives look at separating bonds and share funds
July 1, 2013 Leave a comment
June 30, 2013 5:23 pm
Norway’s opposition mulls oil fund split
By Richard Milne in Oslo
The likely winner of Norway’s looming elections is floating the idea of splitting theworld’s largest sovereign wealth fund in two, as the $720bn oil fund grapples with the challenges of growing ever bigger. Such a move would be the most radical change to the oil fund since it was set up more than two decades ago to manage Norway’s oil and gas revenues. At the start, few expected the fund to receive much money but it has grown rapidly in the last few years on the back of rising oil revenues and is expected to reach $1tn by the end of the decade, making it by far the largest sovereign wealth fund in the world.Jan Tore Sanner, deputy leader of the Norwegian Conservative party, told the Financial Times that if the party retakes power in September he would like to establish an expert group to see if the fund – which is so large it owns an average 1.25 per cent of every listed company in the world – should be broken up.
“We want to have a discussion on how we organise the fund and its structure in the future. Should we have one fund or maybe two funds?” he said.
The Conservatives are on course to retake power after eight years of centre-left rule by the Labour party, with the latest polls giving a centre-right coalition including the Progress party a clear majority of seats.
Mr Sanner, the finance spokesman for the Conservatives, said he was keen to maintain a broad political consensus around the oil fund and how to spend its money, a contentious issue in Norway. “It is the right moment to raise these issues. It has functioned very well up until now. But is the structure the right one for the future?”
He said that “one way” for the split to take place would be to have one fund for shares and one for bonds. “Maybe we could have two funds that can compete against each other. When we have only one fund it’s harder to look into the fund and say this is the best way to do it,” he added.
The oil fund, which declined to comment, has been shifting its strategy to fit its gargantuan size. In recent weeks, it revealed plans to take a more active ownership role in its biggest shareholdings where it will seek to influence the choice of directors. It has also suggested exiting inflation-linked bonds as it believes the asset class is too small for its purposes.
Some investment experts believe the fund should try to exploit its size and long-term nature more to boost its returns. Mr Sanner said the Conservatives would be open to looking at whether the fund should invest in infrastructure alongside its current restriction to equities, bonds, and property.
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