NORWAY Trends and Developments Contributed by: Peter Hammerich, Sebastian Seeger and Didrik Krohg, BAHR
Norwegian authorities have not actively pushed for increased domestic allocations in this asset class. Relatively recently, the Norwegian Financial Supervi - sory Authority insisted that management fees – includ - ing carried interest – be treated as costs in insurers’ own premium scales, rather than simply deducted from investment returns. This follows concerns about large allocations to “in-house” private equity funds with few external investors, and the practice of direct - ing pension customers towards affiliated funds that may charge higher fees. However, the Ministry of Finance overruled the regulator’s reading to the ben - efit of pension funds and their customers. Beyond these retail-focused matters, the regulator’s light-touch approach reflects the reduced need for investor protection among institutional clients. While leaving fund sponsors freer to operate, this also means the regulator gains less hands-on experience in overseeing private equity. The Government Pension Fund Global and Private Equity The Government Pension Fund Global is the largest sovereign wealth fund in the world, currently holding over NOK19 trillion in investments. Since Nicolai Tan - gen, former hedge fund manager, assumed the role of CEO, the debate regarding whether the fund should be permitted to invest in private equity has gained momentum. Historically, the fund has primarily invest - ed in listed companies (currently 71.4% of all invest - ments) but has also allocated funds to fixed income (26.6%), real estate (1.8%) and renewable energy infrastructure (0.1%). To maintain risk independence from the Norwegian economy, the fund only invests outside Norway. According to CEO Tangen, high interest rates and a relatively low number of new stock market listings globally mean the time is ripe for the fund to invest in private equity. This perspective is supported by
recent statements from the Norwegian Central Bank, recommending an allocation of 3–5% of the fund’s value to private equity – a significant proportion that could substantially impact the global private equity market. In April 2024, the Norwegian government voted against allowing the fund to invest in private equity. Nevertheless, an expert committee has been established to continue evaluating the idea. Although policy outcomes remain uncertain, a green light for private equity investments from the world’s largest sovereign wealth fund could recalibrate not only Nor - way’s investment environment but also have world - wide implications for liquidity, valuations and strategic direction in private equity. Investments in Defence and Dual-Use Technologies Historically, many Norwegian asset manager and insti - tutional investors avoided companies linked to weap - ons, including those producing dual-use products. However, as geopolitical conflicts intensify, sentiment shifts towards higher defence spending and spurring innovation in “dual-use” technologies that blend civil - ian and military applications. In Norway, this trend is highlighted by DNB Asset Man - agement’s new defence- and security-oriented funds. There is also a debate surrounding the Government Pension Fund Global’s longstanding ban on defence companies. Any potential policy change could rever - berate among Norwegian institutional investors adher - ing to its exclusion list. In this context, it is also worth mentioning Norway’s thriving space sector. Around 140 entities – mostly small and medium-sized enter - prises, with five major players – collectively generate about NOK11.7 billion annually. Driven by “triangular co-operation” between authorities, research institu - tions and industry (including defence companies), the sector also benefits from proximity to Andøya in Northern Norway, Europe’s first satellite launch site, which will play a pivotal role in this rapidly evolving space.
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