Norway’s Pension Fund to Boost Investments in Asia

Norway’s sovereign wealth fund, the world’s second largest, will increase investments in Asia, as the region leads the global economic recovery, said Norges Bank Governor Svein Gjedrem, this reports Bloomberg Businessweek.

The fund is currently underweight in Asia, said Gjedrem, who is in Singapore as part of yesterday’s opening of Norges Bank Investment Management’s second Asian office. He declined to say how much more investments the fund will make in the region. The central bank’s asset management unit already has an office in Shanghai.

The Singapore office, which will start with five to 10 employees, will be responsible for portfolio management and securities trading, he said. The fund has about S$1.5 billion ($1.1 billion) invested in Singapore, Gjedrem said.

Sovereign wealth investors including Temasek Holdings Pte and Qatar Investment Authority are boosting their investments in Asia as the region’s recovery outpaces the rest of the world. The Asia-Pacific region accounted for the largest number of investments by sovereign wealth funds last year, with 32 transactions, according to the Monitor Group in London.

“The stronger growth in Asia means Asian companies are doing well,” Gjedrem said. “The distribution between different regions may be considered for a change in the future given the fact that Asia’s growth is stronger versus Europe.”

About 10 percent of the fund is currently invested in Asia and about 15 percent of its equity investments are in the region’s companies, according to a statement on its website. The fund is overweight in Europe and underweight in America, the central bank governor said today.

“Asian products in the real economy are more and more important for European countries, and that should over time increase our equity share here in this growing part of the world,” Gjedrem said, declining to say how much more the fund plans to invest in the region.

Norway invests the country’s oil and gas revenue abroad in a fund called the Government Pension Fund Global. The fund gets its investment guidelines from the government and is run by the central bank.

The fund will almost double in size to about $900 billion by the end of 2020, Gjedrem said. The fund, which currently has assets of about $450 billion, will cover 15 percent to 20 percent of Norway’s state spending by 2020, he said.

The country needs to build up its financial funds to meet the challenge of falling output, Gjedrem said. Norway’s oil and gas production will fall “quite rapidly” over the next 10 years to 20 years, he said in a speech at the Singapore Management University today.

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