(Bloomberg) -- Norway’s $1.3 trillion wealth fund, the world’s biggest, risks falling behind its peers due to the slow political process by which it’s bound, according to Global SWF.
The independent group, which provides data and analysis on more than 400 sovereign wealth funds and public pension funds, says the lengthy decision-making that determines which asset classes Norway’s investing behemoth can chase puts it at a disadvantage compared to smaller money managers.
Norway’s wealth fund, which was built from the country’s North Sea oil and gas riches, is managed by the central bank. Any decision to alter its mandate needs to be approved by parliament in a process that can take years. One of the first public statements by Nicolai Tangen, the fund’s chief executive since September, was to point out that the renewable energy assets the investor was finally freed to start buying had become too pricey.
The political setup in which the fund operates presents challenges when it comes to pursuing environmental, social and governance goals “in particular,” according to Diego Lopez, a managing director at Global SWF.
ESG “is a sector that should concern Norway especially given the source of its wealth,” Lopez said in an email. “It is difficult to make incursions without being able to act in private markets, really.”
Lopez said that, while the fund “spends time in the parliament and seeking public consent, smaller and nimbler investors are able to take advantage of unique investment opportunities that are already out there.” He characterized the governance framework as one of the most important areas concerning the fund’s ability to function well in the future.
The fund didn’t immediately respond to a request for comment. Hans Andreas Limi, a member of parliament for the opposition Progress Party, said “it’s important that the parliament provides overall guidelines.” But he also said the chamber shouldn’t “control” the fund “in detail.”
Limi pointed to what he called “an increasing tendency for more parties to use” Norway’s wealth fund “to achieve political goals,” a strategy to which he said the Progress Party “is very opposed.”
Norway’s wealth fund generated $123 billion in returns last year, marking the second-best performance in its history. Its performance was boosted by its holdings of tech stocks, while oil and U.K. holdings led to losses.
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