Investing
Norway wealth fund to consider investing in unlisted equities
Global Banking & Finance Review®
Company
By Victoria Klesty
OSLO (Reuters) -Norway’s $1.3 trillion wealth fund, one of the world’s largest investors, should assess whether to begin investing in unlisted equities, the finance ministry said on Friday, which would be a brand new asset class for the fund.
The fund pools the Norwegian state’s revenues from oil and gas production and invests them abroad in stocks, bonds, property and renewable energy projects.
Managed by a unit of the central bank, it is invested in more than 9,200 companies globally and owns on average 1.5% of all the world’s listed stocks.
“The bank is asked to assess the different aspects of unlisted stocks to form the basis for the ministry’s assessment of this question,” the finance ministry said in its annual recommendation to parliament.
A decision on whether to do so is ultimately up to the country’s government and parliament. It could be presented to parliament next year, Finance Minister Trygve Slagsvold Vedum told Reuters.
Successive Norwegian governments had refrained from such a move until now, due to the risk the fund could be stuck with an investment it could not divest.
Asked whether this could increase the fund’s exposure to risk, Vedum said that would be one of the questions to be examined.
“The advantage of listed shares is that they are more liquid. But when we open for this now, it’s just because we want to have a thorough evaluation of that,” Vedum told Reuters.
The fund is positive to investing in unlisted equity, saying in a Jan. 6 letter to the ministry it was “seeing more and more indications that a larger share of value creation is taking place in the unlisted market”.
In that letter it said that an expert group appointed by the finance ministry in 2017 estimated that the unlisted market was 5% of the size of the listed market.
“The Bank’s updated estimates suggest that this figure is now around 8%,” it said then.
(Reporting by Victoria Klesty, additional reporting by Terje Solsvik, writing by Gwladys Fouche; Editing by Chizu Nomiyama)
Unlisted equity refers to shares of a company that are not traded on a public stock exchange. These shares are typically held privately and may offer higher potential returns but come with increased risk due to lower liquidity.
A sovereign wealth fund is a state-owned investment fund that manages a country's reserves, typically derived from national revenues such as oil and gas. These funds invest in various asset classes globally.
Listed stocks are shares of companies that are traded on a stock exchange. They are subject to regulatory oversight and provide liquidity to investors, allowing them to buy and sell shares easily.
Liquidity refers to how easily an asset can be converted into cash without affecting its market price. High liquidity means assets can be quickly sold, while low liquidity indicates difficulty in selling.
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