Norway’s sovereign wealth fund hits record $1 trillion

OSLO (Reuters) – Norway’s sovereign wealth fund, the world’s largest, totalled $1 trillion for the first time on Tuesday as booming global stock markets and a rising euro lifted the value of its assets.

Oslo has grown increasingly dependent on the fund for public spending, and its record value comes a day after Erna Solberg won an historic second term as Norway’s prime minister.

Solberg’s new government will now oversee a planned overhaul of the fund, in particular of its governance and strategy, which is expected in the coming months.

Established in 1998 to save oil and gas revenues for future generations, the fund is now worth about 2.5 times Norway’s annual gross domestic product, against original projections it would peak at 1.3 times GDP in the 2020s.

A live update on the fund’s website in the morning showed its value at 7.851 trillion Norwegian crowns, corresponding to $1t. according to Thomson Reuters Eikon currency data, or $190,000 for every man, woman and child in Norway.

But despite the growth in the fund’s size, its use for public spending has rung alarm bells, with the central bank’s governor warning in February that it could make Norway too reliant on an uncertain source of income.

Under a recently revised rule, governments can spend 3% of the fund’s value per year, down from 4%, corresponding to 235 billion crowns of the current size. The 2017 budget has earmarked 221 billion crowns for spending.

Two issues are up for review, the first being whether the fund’s management should be completely separated from the central bank.

The second is whether the fund should be allowed to invest in new asset classes, including unlisted shares and unlisted infrastructure projects, to boost its rate of return, something that is supported by the fund’s existing managers.

Almost two-thirds of the fund’s assets were held in equities at the end of the second quarter, giving it control over 1.3% of all globally listed stocks.