Norway ‘will feel the heat of fund outflows’

Norway’s $890 billion (Dh3.268 trillion) sovereign wealth fund is acknowledging that rising withdrawals by the government could hamper its quest to manage more risk and generate greater returns as it takes on more and more negative yielding securities.

The net outflows are “relevant for how we think about the risk-bearing capacity of the fund,” Egil Matsen, the deputy governor at Norway’s central bank who’s in charge of oversight of the fund, said in an interview on Friday while attending a central banking conference in Jackson Hole, Wyoming.

“Say you have a decline in the equity market, and these returns have been partly funding the government,” he said. “Do you want variations in international financial markets to have a direct impact on fiscal policy?”

The fund, set up to safeguard Norway’s oil wealth, has long acted as a backstop for global equity markets because it could measure risk in terms of decades. It has so far shrugged off the withdrawals, which started this year and reached 45 billion crowns ($5.4 billion) in the first half.