Norway joins the $1 trillion fund club

Norway’s sovereign wealth fund has hit US$1 trillion for the first time, driven higher by rising stock markets and a weaker US dollar.

The milestone valuation was reached for the first time on Tuesday, September 19 at 2:01am in Oslo, Norges Bank Investment Management reported. “I don’t think anyone expected the fund to ever reach $1tn when the first transfer of oil revenue was made in May 1996,” said Yngve Slyngstad, the chief executive of the fund. “Reaching $1tn is a milestone, and the growth in the fund’s market value has been stunning.”

The fund’s sheer size has made it a challenge to find markets big enough to invest in. Meanwhile, Norway’s politicians are finding it hard to resist the temptation to raid the world’s biggest state piggy bank, with the petro-dollar addiction threatening to overheat the $400 billion economy.

It has few rivals in terms of size. Japan’s Government Pension Investment Fund was valued at $1.3tn (at the current exchange rate) at the end of March. China has about $3tn in currency reserves. There are also big cash-piles at money management firms such as BlackRock’s $5.7tn and Vanguard’s $4.4tn.

Mr Slyngstad recently suggested it’s now largely fruitless for it to enter new asset classes such as infrastructure because that would be costly and only deliver a blip on overall returns. The investor is also retrenching its global bond portfolio, cutting 23 currencies down to just three – the dollar, the euro and the pound. The fund says it doesn’t make sense to have more diversification in a world in which prices and rates are converging.

But Mr Slyngstad also recently said he sees fundamental issues with the global economic system and trade, which is being buffeted by increasing global political risk. And that’s not good for a fund that owns 1.3 per cent of global stocks.

Bloomberg