Although Norway’s titanic sovereign wealth fund has been barred from private equity allocation, greener pastures await as the government appears comfortable with energy infrastructure investments.
The Norwegian Finance Ministry published a report Tuesday detailing that although these investments will not occur at this time, it would discuss the potential future investments in privately held companies looking to go public for Norges Bank, which runs the gargantuan Government Pension Fund Global (GPFG), vauled at NOK8.1 trillion ($1.04 trillion).
“Based on an overall assessment, the Ministry of Finance does not propose that investments in unlisted equities should be allowed in the GPFG on a general basis,” the report said. “Moreover, the Ministry notes that Norges Bank may currently invest in unlisted companies whose board of directors has expressed an intention to seek a listing, which the Ministry will follow up on in its dialogue with the Bank.”
Despite the fund’s size and liquidity suggest higher returns than most, the Ministry still expressed uncertainty in GPFG’s advantage, adding that this would limit the contribution to GPFG’s overall risk and return.
The Ministry also had issues with the high costs and lack of transparency private equity funds are known for, and expressed concerns that unlisted equities investments could “affect the reputation of the fund” and “challenge key characteristics” in its management model.
Although the ministry banned unlisted infrastructure allocations, it did mention that renewable energy infrastructure could work for GPFG.
“The Ministry of Finance intends to follow up on the said comment of the Standing Committee on Finance and Economic Affairs by assessing whether unlisted renewable energy infrastructure investments can be effected within the scope of the special environment-related mandates, with the same transparency, return and risk requirements as apply to the other investments in the GPFG,” the report said. “In this context, the Ministry also intends to review the regulation of the environment-related mandates in general, including the size of such mandates.”