Norwegian SWF faces private equity review

The $971m GPFG’s current exposure is limited to unlisted companies that intend to seek listing on a recognised marketplace.

Norway’s ministry of finance has convened a panel of experts to assess whether Government Pension Fund Global, the world’s largest sovereign wealth fund at NKr7.8 billion ($971.3 million; €826 million), should be allowed greater freedom to invest in private equity.

GPFG’s private equity exposure is currently limited to unlisted real estate and companies that intend to seek listing on a recognised marketplace, according to a government statement. The new panel will evaluate expected returns, risks and costs for more general private equity deals, as well as whether fund manager Norges Bank Investment Management has, or can be expected to develop, a propensity for identifying targets.

“A key question is to which extent equity investments in unlisted companies represent systematic different investment opportunities compared to listed companies and companies seeking public listing,” the statement noted. “In the opposite case, expected risk and return will mainly depend on the manager’s skills in selecting companies and specific investments.”

The expert group comprises associate professor Trond Døskeland at the Norwegian School of Economics and professor Per Strömberg at the Stockholm School of Economics, who also serves as a board member for the sixth AP fund, according to the statement. The pair aim to present an assessment to parliament in spring 2018.

The finance ministry will consider allowing the sovereign wealth fund to invest in unlisted equities either directly or via private equity funds, Private Equity International reported in April. It has asked Norges Bank for advice and assessments before 10 December, according to the statement.

The review comes amid a flurry of Nordic interest in private equity. In May, Hamilton Lane pooled capital from nine Finnish LPs to invest in secondaries and large US and European buyout funds over a two-year period. Last month, four of Sweden’s AP pension funds received proposals to increase their exposure to the asset class in a bid to maximise returns.

GPFG allocated 64.6 percent of its allocation to equities, 32.9 percent to fixed income and 2.5 percent to unlisted real estate as of 31 March 2017, according to its website. The fund generated a 5.7 percent annual return between 1997 and 2016.

Norges Bank Investment Management declined to comment prior to publication of its own assessment.