‘These companies generally have a lower market value than the companies that form part of the GPFN’s current equities portfolio. So far, investing in these companies has not been seen as an option, because including them in the portfolio would result in little change in the GPFN’s risk profile, at the same time as it would lead to higher management costs,’ says Kjetil Houg, CEO of Folketrygdfondet.
Read Folketrygdfondet’s recommendation here.
The recommendation is the result of the Ministry of Finance having asked Folketrygdfondet to look at potential ways of organising a new asset management unit in Tromsø with Folketrygdfondet as asset manager. The initiative was announced in the white paper on the Government Pension Fund Norway in 2022. Folketrygdfondet’s recommendation was submitted on 15 September 2023.
‘This should be a Nordic mandate with a market-weighted allocation to investments in the different countries’ markets, and based on cost-efficient management with small holdings in each company. We should make use of technological solutions that ensure efficient and forward-looking management of a portfolio consisting of many positions,’ says Kjetil Houg.
‘It will take time to build up a new unit because there isn’t a broad asset management environment in Tromsø at present. The goal should therefore be to establish a minimum staff of five before the unit can start investing. While we lack a firm basis for making assumptions, we have assumed that a staff of between 8 and 15 persons in Tromsø will be sufficient to carry out the assignment in the long term,’ Kjetil Houg says.
Folketrygdfondet was represented on a working group that, in autumn 2022, recommended defining unlisted companies as the investment universe for the new unit in Tromsø, and that the unit should be organised under the Ministry of Trade and Fisheries.
‘We don’t recommend investing in unlisted equities where Folketrygdfondet is the asset manager. This investment area is largely already covered through the investment mandates of other state-owned asset managers. It will be demanding to establish an investment environment in Tromsø because this kind of asset management is not based on Folketrygdfondet’s longstanding expertise,’ says Kjetil Houg.