Norway Wealth Fund Rejects Call to Boost Emerging Markets Betby
Norway’s $890 billion wealth fund shrugged off a call to increase emerging market investments after it over the past four years built up a position of about 10 percent in the world’s fastest growing economies.
“There are limits to such an allocation,” Egil Matsen, the deputy governor at Norway’s central bank who’s in charge of overseeing the fund, said in an interview on Wednesday in Bergen, Norway. “We’re comfortable with the geographic distribution of the fund now.”
The fund, whose strategy is set by the government, has slowed an expansion into emerging markets in a shift that started in 2012. It had 9.5 percent of its equity holdings in emerging markets, with China the largest investment, followed by Taiwan and India, according to its second-quarter report. It held 12.7 percent of its fixed income in those markets.
With the government now withdrawing money for the first time and amid negative rates, the choice of where to invest is becoming more important.
While pension and sovereign wealth funds are struggling with weak returns in OECD markets, opportunities can be found in infrastructure, private equity and unlisted assets in developing economies, according to a report by Re-Define, commissioned by the Norwegian Investment Fund for Developing Countries, or Norfund, published Tuesday.
Institutional investors “face a bleak landscape,” the report’s author, Sony Kapoor, wrote.
“True economic opportunities lie in expanding productive capacity by directing capital towards infrastructure, private equity, unlisted assets, particularly in capital poor, but faster growth emerging and developing economies,” he said.
While the funds holding’s imply support for that view, that perspective isn’t the only one governing the fund’s investments, according to Matsen. It’s also still tilting its investments toward emerging markets.
“We have a slightly higher weight in emerging markets in what we’re holding than what is in the benchmark indexes,” he said.