Norwegian pension fund’s investments in Lankan stocks at US $ 65mn in 2016

„First SL investment in 2015; total investments during 2015 at US $ 31mn „About 16% of fund’s investments placed in Asia; majority in developed nations „A shift in investment focus to emerging markets expected in future „Embassy in Colombo says fund no

The Norwegian Government Pension Fund Global has invested US $ 65 million in Sri Lankan stocks in 2016, compared to US $ 31 million in the previous year, a Royal Norwegian Embassy statement said.

“The increase in investments is mostly a result of larger ownership in the companies they had already invested in,” the statement said.

The Norwegian Government Pension Fund Global is a sovereign wealth fund, with a mandate to safeguard and administer the Norwegian government’s revenue from the oil and gas sector.

Valued at US $ 890 billion, the fund is one of the largest sovereign wealth funds in the world, currently holding about 1.3 percent of the world’s stocks.

On appointment by the Norwegian Ministry of Finance, the fund is managed by the Norwegian Central Bank through the Norges Bank Investment Management (NBIM). NBIM made its first investments in Sri Lanka in 2015. The fact that NBIM started to invest in Sri Lanka suggests that, the Sri Lankan investments opportunities and market standards have improved in the last couple of years, the embassy statement said.

In line with the goal to reduce risks, the Sri Lankan investments are diversified across several sectors. The biggest investments have been made in the industrial and financial services sectors with 63 percent of the total investment.

At present 16 percent of the fund’s investments are placed in Asia. Japan is the biggest market with 9 percent of the fund’s total equity placements, while emerging economies such as China and India have respectively 2.7 percent and 1 percent of the equity placements. Also, 0.6 percent of the equity is placed in Africa.

The fund historically has invested most money in highly developed countries. About 78 percent of its investments are currently placed in Europe and in North America.

However, this is likely to change as the Norwegian Central Bank has indicated that they will shift more of their investments toward emerging economies in the future.

As one of the largest sovereign funds, the Norwegian Government Pension Fund Global has received global attention, and Norway has been put on the map as an international investor.

The Fund is not only distinguished by its sheer size, but also by how it is administrated. NBIM conducts what they call responsible investments, meaning that all investments must be ethically justifiable.

Firms that are deemed unethical by the fund’s Council of Ethics are excluded from the fund.

One of the fundamental principles of the Norwegian fiscal policy is the so-called budgetary rule. It states, the government may only spend the expected real return of the fund, estimated at 4 percent per year.

This ensures that future generations will also benefit from the petroleum revenue.

Meanwhile, the Royal Norwegian Embassy in Colombo emphasized that the Norwegian Central Bank is completely independent from the Norwegian government and therefore, the fund is not used as an instrument of the Norwegian government’s foreign policy, or as a tool in foreign aid.

“The only mandate for the Norwegian Central Bank is to safeguard and ensure further growth of the fund.

Therefore, the investments in Sri Lanka from the Norwegian sovereign wealth fund are an indication of the investor confidence and the potential investment opportunities that are available in the market,” the embassy statement noted.