Norway Oil Fund to Invest More in US Stocks, Reduce EU Exposure

Norway's wealth fund to follow 'value creation' with increased bets on US, Canada
September 22, 2020 Updated: September 22, 2020

Norway’s massive oil fund is planning to invest more heavily in the United States and Canada while cutting back on its investments in Europe, according to a statement made Monday by the Norwegian government.

Officially called the Government Pension Fund Global, the oil-rich nation’s sovereign wealth fund is one of the world’s largest at $1.15 trillion, and is deliberately spread across markets, countries, and currencies to capture global growth while minimizing risk. The fund is invested in more than 9,000 companies worldwide, including Apple, Microsoft, and Samsung, and holds an average of 1.5 percent of all of the companies listed on global stock exchanges.

According to calculations performed by Reuters and based on government data, the change of course toward North American companies could lead to the investment of an extra $50 billion in U.S. stocks.

“The changes we are proposing will ensure the investments better represent the distribution of value creation in listed companies globally,” said Norwegian Minister of Finance, Jan Tore Sanner, in a statement.

“The recent market turbulence demonstrates that we need to be prepared for sudden and large movements in the financial markets. We have a long-term perspective and a robust investment strategy. This will serve us well in the long run,” Sanner said.

In the past, the fund has tended to invest more heavily in those countries Norway trades with most, which led to higher weightings for European companies. The fund will retain its focus on European stocks, while tempering this by moving some investments to North American firms.

Safeguarding the Norwegian Economy

One of the largest offshore oilfields in the world was discovered in the North Sea off the coast of Norway in 1969. Over the next decade, and especially after the oil shocks of the 1970s, the Nordic nation decided to create an oil and gas revenue fund to provide for the future needs of Norwegian citizens.

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The field center of the Johan Sverdrup oil field in the North Sea, west of Stavanger, Norway, on Jan. 7, 2020. (Carina Johansen /NTB Scanpix/AFP via Getty Images)

According to Norges Bank Investment Management, which takes care of the fund’s operational management, “The aim of the oil fund is to ensure responsible and long-term management of revenue from Norway’s oil and gas resources in the North Sea so that this wealth benefits both current and future generations.”

Through prudent investment and reinvestment in stocks (70.8 percent), bonds (26.5 percent), and real estate (2.7 percent), the fund had grown to almost $200,000 per Norwegian citizen in 2019—the fund’s most successful year on record.

The Path Forward

Norway’s minority government must seek approval from parliament for major changes in the fund’s strategy, a process that can take months.

The fund last amended its geographical weighting in 2012, and has reduced its exposure to European markets from 50 percent of equities held at that time to around 33 percent in 2020, according to Reuters.