Norway's US$1 trillion fund wants to invest in private equity

[OSLO] Norway's US$1 trillion wealth fund said allowing it to invest in private equity would boost returns and spread risk to a broader range of companies.  In response to a request by the Norwegian Finance Ministry, the fund on Wednesday said given its size and long-term outlook it was "well-suited" to invest in unlisted equity.

"A broader investment universe may also enable the fund to be invested in different types of companies to those that are available in the public equity market," the fund said in a letter to the Finance Ministry. "Based on historical data, investing in unlisted equities can also be expected to generate a slightly higher return after costs than listed equity investments." The Norwegian government is currently considering whether to allow its wealth fund, the world's biggest of its kind, to expand its investments into private equity. It this year was given the green-light to raise its stake in stocks to 70 per cent of its portfolio to increase returns.

The fund argued in the letter that its experience from investing in real estate has given it the necessary know-how for private equity. It says the most relevant approach would be to invest in and alongside private equity funds.

"Norges Bank believes that the risk associated with unlisted equity investments could be adequately constrained in the management mandate," it said. "Investments in unlisted equity lie closer to the Bank's existing investment activities than was the case when the Ministry first permitted investments in unlisted real estate."

BLOOMBERG