Norway’s ministry of finance has forecast that its $562bn government pension fund could double in size by 2030.
With growth of more than 4.25% per year, this was a distinct possibility when inflows of oil revenues were also factored in, said Tom Fearnley, head of the finance ministry’s asset management department. He believes that reaching more than $1100bn in assets is achievable, even with low expectations and confidence levels.
Speaking at a Sovereign Wealth Focus event in Edinburgh in June, he told delegates: “There is a lot of uncertainty in terms of where our size will be, and this is the first time we have revealed the amount of uncertainty, but we think that, even given the worst of circumstances, we’re going to grow.”
Mr Fearnley referenced an April 2011 ministry of finance report to parliament that showed that, even with a confidence level of only 68%, the fund could still more than double in size. With a 95% confidence level, an improbable projection showed assets more than tripling in 20 years.
Since January 1998 the fund has realised a net real return of 3.05%.
According to crossborder investment monitor fDi Markets, the sovereign wealth fund (SWF) is by far the country’s biggest outward investor and is considered to be the world’s most transparent SWF. All its equity and bond holdings are available online. It revealed it lost a huge portion of its value in the credit crisis, but its value has since rebounded to exceed its 2007 level.
Since the crisis, the SWF’s most talked about investment was its purchase of a 25% stake in The Crown Estate’s Regent Street properties in London, a deal that cost it £450m. The fund’s first direct real-estate investment, it plans to allocate up to 10%, or about $56bn more, into the asset class. Officials at the fund have been tight-lipped about where this investment will be made, but have said it will take them several years to reach this target allocation.
Asset managers have confided that they believe the SWF will make similar, large and marquee investments with its real-estate moves. Some have suggested its next investment will be for a flagship building, such as a skyscraper.