World’s Largest Allocator Eyes Private Equity

Norges Bank Investment Management, which runs Norway’s massive sovereign wealth portfolio, asked this week for government permission to expand into private equity.

The 852 billion kroner ($1.37 trillion) GovernmentPension Fund Globalis the world’s largest pool ofinstitutional capital. But, unlike the vast majority of its peers,Norges Bankdoes not invest in private equity. That may change.

Norges Bank Investment Management’s chief executive officer Yngve Slyngstad and Norway’s central bank governorØystein Olsenrecommended Monday that the Ministry of Finance permit the fund to makeunlisted equity investments. Even a tiny private equity allocation would be enormous in absolute terms.

“The fund’s size, long-term horizon, and limited liquidity needs may make it well-suited to investing in unlisted equity,” Slyngstad and Olsen wrote in a January 8 letter to the ministry. “A broader investment universe may also enable the fund to be invested in different types of companies to those that are available in the public equity market.”

With a stockportfolioworth $650 billion at the end of September, the fund owned 1.3 percent of listed companies worldwide and 2.3 percent inEurope. Unlisted real estate, which accounted for just 2.5 percent of its holdings at the end of last September, equated to $25 billion.

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Slyngstad and Olsen indicated that they would gradually deploy capital into private markets, should they enter them. “If the ministry does permit unlisted equity investments, the bank will approach investment opportunities and build expertise gradually, invest via and alongside others in a responsible manner,” they wrote.

Before the world’s private equity managers begin counting their management fees, Slyngstad and Olsen pointed out that receiving the ministry’s go-ahead would “not automatically mean that the bank actually invests the fund in unlisted equity.”