Norway’s SWF Bullish on Europe

(June 13, 2011) — Norway’s $570 billion sovereign wealth fund, reportedly the world’s largest, is optimistic about the long-term prospects for Europe, the Financial Times has reported.

The optimism, articulated by Norges Bank Investment Management’s CEO Yngve Slyngstad in an interview with the newspaper, was belied somewhat by the fund’s decision to shift more of its assets into emerging markets. European equity comprises half of the fund’s equity holdings and it recently announced plans to diversify by shifting capital away from the continent, according to the FT.

Slyngstad addressed concerns that the European debt crisis could come to a head if Greece restructures its debts.

“The changes going on in Europe at the moment may actually be positive for the private sector,” he told the FT. Companies, he continued, would likely benefit from “restructuring [and] maybe some narrowing of… the public sector.”

Institutional investors have been worried about the prospects of Europe for some time. An early May survey by Fitch of European senior fixed-income investors underscored the fear. In that survey, 64% of bond investors responded that their biggest concern was Europe’s sovereign debt crisis. The bulk of respondents expected developed market sovereigns to endure the biggest refinancing challenges, aiCIO reported. Hatfield Philips International (HPI) sounded a similar note on June 9 when it cautioned pension funds from embracing the European property market, stressing the continued fragility of the European market.

The Norwegian sovereign wealth fund was recently crowned the world’s largest in a June 7 report authored by the Monitor Group, a consulting firm based in Cambridge, Massachusetts. Citing the Institute for International Finance, the report claimed that Norway’s SWF dwarfed the United Arab Emirates’ Abu Dhabi Investment Authority (ADIA). Like most SWFs, ADIA’s financials are intensely secretive and there is not a total consensus about the Monitor Group’s conclusion. The SWF Institute, for example, maintained that the ADIA remained the world’s largest.

Norges Bank Investment management was founded in 1990 and invests revenue from Norway’s rich oil possessions in the North Sea. The fund is worth about $116,000 for every member of Norway’s 4.9 million population.