The largest sovereign wealth fund of the world, the $1-trillion-plus fund of Norway, is reportedly contemplating to create a balance in of its investments with a spread between Europe, Asia and the Americas, according to reports quoting senior officials.

The last time that Norway had conducted an examination of the regional weight of the fund’s reference portfolio, in 2012, there has been faster growth in the equity markets in North American compared to those in Europe.

And the slowing economy in Europe and the shrinkage of the economy of the largest economy of Europe, Germany, even as trade tensions and Brexit uncertainty haunts the market, there has been faltering investor confidence in Europe.

“This (regional weighting) is exactly the question that we are considering now, and we are giving advice to the (finance) ministry about regional weighting of the equity reference index, by the end of this month probably,” Egil Matsen, deputy central bank governor in charge of the fund, said.

The proportion of the money of the fund that is currently invested in stock, bonds and property across different regions globally was being referred to by in Matsen’s remarks. The investments include a stake in London’s Regent Street.

A unit of the central bank manages the fund. The fund’s investment directions are taken by the finance ministry and parliament at the advice of the unit of the central bank.

According to reports, nothing is clear at this moment about the possible recommendations of the fund and the ultimate decision that would be taken by the finance ministry.

“One of the questions is whether the current weighting, whether there are reasons to adjust that,” Matsen, the top public official responsible for the sovereign wealth fund, said in an interview.

The revenues generated by Norway from sale of oil and gas is invested in a rainy day fund and its size has grown to such an extent now that it is now equivalent to $197,000 for every man, woman and child in Norway.

Currently, the investments of the fund is more concentrated on stocks in Europe compared to equity in the United States compared to what the current situation in those markets mandate. This is because of the present strategy of the fund of making investments in the most important trading partners of Norway.

But in 2012, that policy was eased by the fund and since then the investments of the fund in European shares has been reduced to about 34 per cent by the end of 2018 from about 50 per cent. At the end of last year, about 43 per cent of the total investments of the fund were made in North America while just 17 per cent were made in Asian markets.

“Uncertainty about global trade and economic growth dampened returns early on, but markets rallied toward the end of the period, driven partly by the prospect of more expansionary monetary policy in developed markets,” the fund’s deputy CEO, Trond Grande, said in a statement.

(Adapted from Reuters.com)

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