A Norwegian government commission has today recommended that the country’s sovereign wealth fund increase its equity allocation from 60% to 70%.
The majority of the commission found that Norway’s $880 billion (€800.1 billion) Government Pension Fund Global, which invests oil reveneues, should take on more risk by investing larger sums in equities and less in bonds.
“The majority is of the view that the risk is acceptable, provided that there is political will and ability to adapt economic policy to the accompanying increase in risk, in both the short and long run,” said the commission in a statement.
However, a minority of the commission’s members including the chairperson, Knut Anton Mork, recommends that the equity share be reduced to 50%.
The commission’s members who did not wish to increase the fund’s equities allocation said that a lower equity share would naturally translate into lower expected returns for the fund as a whole. They said fiscal policy needed to adapt to this.
“The need for a margin of safety is reduced by a lower equity share, but not eliminated,” said the group in its statement.
An increase in equity allocation for Norway’s fund is significant for global markets, as it currently owns on average 1.3% of every single listed company in the world and 2.5% in Europe.
The report was presented to Norway’s minister of finance, Siv Jensen.
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