Norges Bank Investment Management, the manager for Norway’s national pension fund, is seeking a multi-billion-dollar private equity expansion of the Government Pension Fund Global. In a letter sent to the Norwegian Ministry of Finance, the fund requested permission to implement a private equity strategy.
The letter proposed a gradual approach to growing a private equity portfolio, eventually encompassing 3 to 5% of the fund, which corresponds to roughly $40 to $70 billion. According to NBIM, a private equity fund of this size would make it competitive with some of the largest private equity investors and would allow the fund to facilitate adequate diversification across managers and investment vintages.
NBIM does not currently have exposure to private equity, private credit or most alternative asset classes. According to the fund’s website, roughly 70% of its asset allocation is to public equities, and roughly 30% is in fixed income. The fund is permitted to invest up to 7% of the fund in real estate and up to 2% in unlisted infrastructure for renewable energy.
“It is our assessment that permitting investments in unlisted equities would be a natural evolution of the investment strategy,” said Ida Wolden Bache, chair of Norges Bank’s executive board, in a November 28 press release. “An increasingly larger share of global value creation takes place in the unlisted market. We believe that such an opening could give higher returns for the fund over time. We think it will be possible to invest in unlisted equities in a way that meet our expectations on transparency and responsibility.”
NBIM’s GPFG fund manages roughly $1.4 trillion in assets, making it the world’s second largest asset owner by AUM, following only Japan’s GPIF. If NBIM receives permission to start a private equity fund, the fund then would formulate a “more detailed investment strategy.”
The Ministry of Finance has rejected previous requests to invest in private equity, including in an April 2018 report.
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Tags: Government Pension Fund Global, Ida Wolden Bache, NBIM, Norges Bank Investment Management, Norway, Private Equity