Norway’s $1 Trillion Wealth Manager Vows to Stick to U.K. ‘No Matter What’
The man managing Norway’s $1 trillion wealth fund is looking beyond the current political turmoil, vowing to invest in the U.K. “no matter what” and planning to plow another $100 billion into the U.S. stock markets.
The fund has so far taken a sanguine approach to turmoil stemming from Brexit, even adding to its London real estate holdings in the immediate aftermath of the 2016 vote. It has repeatedly argued that the U.K. will remain a European economic power regardless of the outcome of Brexit.
“What we’ve said for three years now is that we are a long-term investor in Great Britain no matter what the outcome,” Yngve Slyngstad, the chief executive officer of Norges Bank Investment Management, said in an interview in Oslo with John Micklethwait on Bloomberg TV. Countries should “know that we are long-term committed” and a “stable investor,” he said.
Built from Norway’s oil riches over the past two decades, the fund has been designed to invest in markets around the world to reap the benefits of increased global trade and closer economic ties. That model is now being called into question by an escalating trade dispute between the world’s economic powers, rising authoritarianism in many countries and the decision by the U.K. to quit the European Union.
The trade dispute will probably work itself out “over time,” Slyngstad said, adding that it will be “a lot more difficult” to break up global supply chains than it may seem. “There’s a huge upside in keeping the production chains together,” he said.
The world’s biggest wealth fund owns roughly 1.5% of global listed stocks and has this year brought the share of equities up to 70% of its portfolio as it takes on more risk to boost returns in an ultra-low rate world. The investor held about $66 billion in negative yielding bonds at the end of June.
Negative rates are the main worry right now, Slyngstad said. He has struggled over the past years to meet the return target, which was lowered in 2017 to 3% from 4%.
The fund has been “quite surprised” at what happened this year with falling rates and is now neutral toward its benchmark, he said.
Besides raising its stock holdings to 70% this year, the fund is in the midst of a series of big changes. It has proposed shifting almost $100 billion to U.S. stocks from European markets to gain a bigger share of the largest tech companies. It has decided to dump emerging market debt, scaled down plans for real estate, is divesting some oil stocks and is preparing to invest in renewable energy infrastructure.
But the overarching principle is that the fund looks past political risk, Slyngstad said. “We have to look 30, 40 or 50 years ahead, and look at the bigger picture.”
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