Asset AllocationAugust 18, 2014

Norway SWF Urged to Upgrade Oversight Before Diversifying

The Labor Party in Norway has called for the $880 billion Government Pension Fund—Global to up its governance game before moving into private equity and infrastructure.<br />

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Norway’s biggest political party has challenged the country’s $880 billion sovereign wealth fund to improve its governance before hiking exposure to riskier assets.

The Labor Party’s concerns centre on the fund’s purchase of a stake in Formula One prior to its planned IPO, initially planned for 2012. However, the listing was subsequently cancelled, leaving the Norway Government Pension Fund—Global with a private equity holding that its investment rules do not permit it to own.

“The Formula One case was quite an eye-opening experience for politicians who are dealing with issues regarding this fund. It illustrates that we need a strong system of monitoring.”—Marianne Marthinsen, Norwegian Labor Party finance spokesperson.

Bernie Ecclestone, CEO of Formula One, this month paid $100 million to settle a German corruption case, which has served to fuel political debate about the investment.

“The Formula One case was quite an eye-opening experience for politicians who are dealing with issues regarding this fund,” Marianne Marthinsen, the Labor Party’s finance spokeswoman, told Bloomberg. “It illustrates that we need a strong system of monitoring.”

The fund is currently lobbying for greater investment powers, including permission to allocate to infrastructure and private equity. But Marthinsen said this permission should be withheld until the fund’s oversight and governance processes can be reviewed.

Norway’s Labor Party holds 30% of the seats in the country’s parliament but is not part of the ruling coalition. The government—made up of the Conservative and Progress parties—has supported the sovereign wealth fund’s current structure, with Finance Minister Siv Jensen last week stating that there was no need for change. However, the coalition had voiced a proposal to break up the fund when it came to power last year.

Marthinsen also argued that the central bank’s role in overseeing the fund should be addressed as it was distracting from monetary policy. She suggested splitting or strengthening the committee. The governor and deputy governor of Norway’s central bank both sit on the seven-member committee which runs the fund.

She said: “The discussion of whether or not to have one common board is clearly one of the discussions we need to have in the years to come. We also have people who are quite concerned that the monetary policy is suffering because the management of the fund is taking more and more of the board’s time.”