Norway’s $1 Trillion Wealth Fund Wants More Time to Shift Stocks

(Bloomberg) -- Norway’s $1 trillion wealth fund recommended it be given more time to adjust its stock portfolio should it stray away from its 70 percent target.

The recommendation is part of a review of the rebalancing rules after the government boosted the amount of shares it can hold from just above 60 percent. The fund also recommended tightening the band at which it can deviate from its target to 2 percentage points from 4 percentage points.

“Transaction costs and deviation from the strategic target can be reduced with the combination of a narrower no-trade band and more gradual adjustment back to the strategic target than at present,” Norges Bank Governor Oystein Olsen and Norges Bank Investment Management Chief Executive Officer Yngve Slyngstad said in a letter to the Finance Ministry.

The fund recommended that the rules on how quickly it should rebalance be exempt from publication. It now has to start rebalancing at the end of the following month.

The world’s largest wealth fund was in 2017 given the greenlight to increase it stock portfolio to 70 percent in a bid to boost returns. It holds about 30 percent in bonds and also has a real estate portfolio that can equal about 7 percent of its assets.

The sheer size of the fund and the larger equity holding made it relevant to look at the rebalancing rules, Ole Christian Bech Moen, chief investment officer allocation strategies, said in an interview. What’s more, “the market conditions have changed slightly, it’s not as easy to do large volumes now than it was 10 years ago,” he said.

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