Norway Oil Fund Says Barriers to Free Capital Will Hurt Returns

Norway’s $717 billion sovereign wealth fund signaled it risks missing out on returns based on global economic growth amid concern that barriers to capital movements and taxes on investments are spreading.

“There are large parts of the global economy where we don’t have the opportunity to invest,” Yngve Slyngstad, chief executive officer of Norges Bank Investment Management, said at a parliamentary hearing in Oslo today, citing barriers in China in particular. “There’s some risk that the fund won’t take part in the collected growth of the world economy if we can’t get these obstacle reduced over time.”

Europe’s biggest equity investor, which got its first capital injection in 1996, has been taking on more risk as it expands globally to invest Norway’s oil wealth. It added stocks in 1998, emerging markets in 2000 and real estate in 2011. It’s now in the process of a strategy shift to capture more global growth, moving allocations away from Europe in favor of emerging markets in Asia and South America.

“We’re not sure there will be the same free movement of capital that we see now,” Slyngstad said. “It could become easier to invest in these countries, but there could also be new barriers and, secondly, there could also be greater taxation on our returns.”

China Quota

The fund said in its annual report released last month that it became the first foreign investor to be awarded the maximum $1 billion quota of investments in Chinese A shares, an increase of $300 million. Its investment in China accounted for 1.6 percent of its equity holdings at the end of 2012.

The fund reduced its holdings in French and U.K. government bonds by almost half last year as it raised its share of government bonds in emerging-market currencies to 10 percent of its fixed-income holdings by adding investments in Turkey, Russia and Taiwan.

Slyngstad said today the fund will need to invest in “things where the expected return is per definition uncertain” to keep pace with the government’s 4 percent real return target.

The fund gained 447 billion kroner ($79 billion) last year as central bank stimulus measures boosted global stock markets, returning 13.4 percent. Its real annual return over the past five years has been 1.02 percent, according to calculations provided on its website.

Mikael Holter in Oslo at +47-22-00-8209 or

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