After a recent response to a June request by the Ministry of Finance, it appears that private equity investment is on the horizon for Norway’s $1 trillion Government Pension Fund Global (GPFG).
“It will be natural for the Bank to approach investment opportunities and build expertise gradually. The strategy for the fund’s unlisted investments will evolve over time and will be adjusted in the light of experience,” the fund’s manager, Norges Bank, responded in a Monday letter, signed by Norway’s Central Bank Governor Øystein Olsen and Norges Bank CEO Yngve Slyngstad, “Priority will be given to areas where the expertise we build up can be expected to have positive knock-on effects on other parts of the fund’s management.”
In addition to equities of companies in the process of going public, the bank is currently authorized to invest in public equities, fixed-income, and unlisted real estate beyond Norway. While it had previously called for the inclusion of private equity investment in 2010, it is unclear as to why it has taken eight years for the ministry to consider approving the move.
“Large investors will often have better opportunities and better abilities to co-invest alongside private equity funds. Investors are not normally charged management fees for these co-investments,” the letter read, “Several studies indicate that investors with large sums invested in unlisted equity have achieved slightly higher returns after costs than investors with only small sums invested. Lower management costs as a result of better negotiating power and more resources to conduct thorough due diligence have been mooted as possible explanations.”
“The Ministry of Finance aims to present its assessment of whether the GPFG should be permitted to invest in unlisted equity in the annual white paper to Parliament this spring,” Tore Vamraak, Norway’s state secretary in the finance ministry, said in a Wednesday statement obtained by Financial News London. “The assessment will build on advice from Norges Bank and a report commissioned from an expert group.”
Vamraak expects the report to be published shortly.
Tags: Government Pension Fund Global, Norges Bank, Pension, Private Equity, Sovereign Wealth Fund