May 12, 2011

Norwegians Would

With all the hullabaloo made over sovereign wealth funds, it’s surprising that one of the largest is one of the most discreet. Or perhaps not so surprising when you consider that it is Norway’s, a country not known for aggressive self-promotion

According to Business Week, the Government Pension Fund Global has $570 billion in it, more than Abu Dhabi Investment Authority’s much noisier $500 billion. Given how dependent it is on oil – along with the allied business of shipping, one of Norway’s principal industries – and what has happened to the oil price of late, it has boomed and allowed Norway to make big strategic purchases in new asset classes.

The most notable of these was a quarter of Regent Street for $746 million. The receipt would have had ‘Dieu et Mon Droit’ at the top – the seller was the Queen.

Steen Foldberg, market leader for the Nordic region, Belgium and Luxembourg at Merrill Lynch Wealth Management, says that the SWF money has been used with restraint: ‘Compared to a lot of other oil-producing nations, they created a lot of funds for the citizens. They were very concerned that the salary levels, house prices wouldn’t get out of hand. Just because they found oil, they didn’t go crazy. They’ve accumulated this oil wealth and they’ll be careful about it; they’ll have a reserve of capital.’

The wider range of investments made by the SWF is reflected in HNWs’ portfolios (there are 75,000 dollar millionaires), which tended to be weighted with Norwegian assets, Foldberg says: ‘Norwegian investors until relatively recently were rather unsophisticated – very conservative investors predominantly in bonds.’ Now they are keen on infrastructure and biotech start-ups, and are looking to allocate money abroad too.

So should you be thinking about taking advantage of this Scandinavian uptick? Norwegians would.