Norwegian Petroleum to invest in private equity

Europe’s biggest pension fund will make its first investments in private equity and real estate, following recommendations from Norges Bank regarding the investment strategy of the fund.

Norwegian Petroleum, Europe’s largest pension fund, plans to invest in private equity and real estate for the first time.

Norwegian Petroleum: to foray into private equity and real estate

Pål Haugerud, deputy director general, the Norwegian Ministry of Finance, told PrivateEquityOnline: “It is a natural next step in our work with the investment strategy of the fund to look into asset classes not in our benchmark.  If we were to invest in the asset class it would be for the long-term and the portfolio would be built up gradually over several years.”

No sector or regional focus has been decided.
 
In the National Budget 2007 the Ministry wrote: “The largest asset class currently not featuring in the Fund’s benchmark portfolio is investments in real estate. The Ministry will in the period ahead consider the merits of investments in for example real estate, and view this assessment in light of the advice already received regarding an increase in the equity portion.”

The fund, which receives much of the surplus made by Norway’s oil exports, was founded in 1996 to provide an economic buffer in the event of oil supplies running out.

In the past year the petroleum fund has yielded ten per cent and made an annualised return of 4.6 percent over the past five years.

The value of the fund increased by Nkr 207 billion (€25 billion; $33 billion) in the third quarter, to Nkr 1712 billion.  The increase in value in the third quarter is the largest quarterly increase in the fund’s history and was due to the transfer of new capital, the positive return on investments and the weaker krone, which increased the market value by Nkr 61 billion and Nkr 66 billion.