Norway’s $1tn oil fund looks to invest in unlisted groups

Oil fund limited to investing in listed companies or those intending to list

Norges Bank, the central bank that manages the oil fund, recommended that the investor be allowed to hold up to 1 per cent of its equity portfolio in unlisted companies. rPhotograph: iStock

Norges Bank, the central bank that manages the oil fund, recommended that the investor be allowed to hold up to 1 per cent of its equity portfolio in unlisted companies. rPhotograph: iStock

 

Norway’s $1 trillion (€902 billion) oil fund should be able to invest in large unlisted companies, according to the investor’s manager, as it seeks greater exposure to private technology groups.

Norges Bank, the central bank that manages the oil fund, recommended that the investor be allowed to hold up to 1 per cent of its equity portfolio in unlisted companies, currently equivalent to about $7 billion.

The proposal is likely to unleash a political debate in Norway as the oil fund has so far been limited to investing only in listed companies or, under a minor exception introduced in 2011, unlisted businesses who have “an intention” of floating.

The fund has only used the exception once, but it proved highly controversial in Norway. It bought into the holding company behind Formula One racing in May 2012, only for the group to cancel its planned stock market listing the following month.

Norway’s central bank proposed getting rid of the requirement for “an intention” to float and instead allow the fund to own “large companies that are not yet listed”.

“Companies of this type will often already have other institutional investors as shareholders. This, in turn, can help generate some liquidity in the shares. Based on experience, it is reasonable to expect some of these companies to go public at a later date,” the central bank added.

Private companies

Several other sovereign wealth funds have long been able to take sizeable stakes in private companies such as Saudi Arabia’s investing in the likes of Uber and SoftBank’s Vision Fund and Temasek buying into Funding Circle.

Norway’s fund already invests in some unlisted assets in property as it owns large swaths of prime real estate in cities such as London, New York and Paris as well as logistic centres in Europe. But bids by the fund and central bank in the past to be allowed to invest in private equity have been turned down by the government.

The proposal on unlisted companies comes only the day after Norges Bank recommended that the fund slash its holdings of European equities and invest more in North American shares. It also comes as the fund has record holdings of equities with 69.3 per cent of its $1 trillion assets in shares. It started in 1996 only invested in bonds. – Copyright The Financial Times Limited 2019