OSLO, Nov 19 (Reuters) – Norway’s $1.2 trillion sovereign wealth fund plans to increase its reliance on external investment managers, the deputy chief of Norway’s central bank said on Thursday, in a move that could prove contentious at home.
The use of external managers for some of the world’s largest sovereign wealth fund’s cash – and the associate costs that come with it – has at times been questioned in the Nordic country, with close scrutiny of those costs from the Norwegian media and some opposition politicians.
“The Executive Board intends to raise the limit for the external management mandates to 5% of the fund next year,” Jon Nicolaisen, the central bank’s deputy chief, said in a speech.
The fund had 3.9% of its capital under external management at the end of 2019, according to fund data, or 389 billion crowns ($43 billion). At its current value, the new limit would make available some $60 billion to external managers.
Nicolaisen defended their use, saying the benefits far outweigh the cost and that cumulative excess return up to and including 2019 amounted to 48 billion crowns.
“The results have exceeded expectations,” Nicolaisen said of the external mandates.
Such mandates are of particular value in emerging markets, where local knowledge and proximity are essential to assessing risk, he said.
The Norwegian wealth fund invests the revenues of the country’s oil and gas production into stocks, bonds and unlisted real estate. ($1 = 9.0461 Norwegian crowns) (Editing by Timothy Heritage)