Government Pension Fund - Global, the Norwegian sovereign wealth fund financed by the country’s oil profits, has been advised to allocate a proportion of its assets to less liquid investments, such as private equity, in order to diversify risk and increase returns. It received this formal proposal from Norges Bank, Norway’s central bank, the asset management arm of which manages the Government Pension Fund - Global. Its letters were published in the Ministry of Finance’s national budget proposal for 2011. Norges Bank believes that the fund’s size (NOK 2.8 trillion as of June, 2010) and its long-term horizon make it an ideal investor in private equity. It proposed that private equity should form part of the government’s equities allocation, which currently stands at 60% of its total assets.
The Ministry of Finance had announced in 2009 that it intended to allocate NOK 20 billion to the cleantech sector over the next 5 years as part of an environment-related investment programme. So far, investments made as part of this programme have been in traditional listed equities and bonds. The Ministry of Finance was also interested in establishing a programme for sustainable investments in emerging markets. Norges Bank’s letter highlighted the fact that private equity investments would facilitate both investment programmes. However, it cautioned against making investments in unlisted assets solely in these sectors, advising that they should form part of a broader private equity allocation.
More information on institutional investors in private equity can be found on Preqin’s Investor Intelligence database.