by Jess Delaney, Institutional Investor
Not all sovereign funds were caught off guard when oil markets crashed. Norway’s GPFG can support Oslo’s budgetary needs without having to sell any assets and will still have money left over for new investments in 2016, according to a spokesman. “We have cash flow from dividends, rent from real estate and coupons from bonds to reinvest,” says Thomas Sevang, head of communications and external relations for Norges Bank Investment Management, the central bank arm that runs the fund. “We haven’t changed; the strategy stands.”
The GPFG, which allocates about 60 percent of its portfolio to stocks and 40 percent to bonds, has ample liquidity to fulfill its commitments to the government. In fact, over the past few years the fund has begun venturing into more illiquid asset classes after winning approval to allocate up to 5 percent of its portfolio to real estate. The government has also been mulling a proposal to open the door for infrastructure investing.
“For a long time some sovereign funds haven’t had to worry about drawdowns, they’ve just had to continue to expand,” Patrick Schena, co-head of the Network for Sovereign Wealth and Global Capital at Tufts University’s Fletcher School. “In some respects, they have grown to a point of outgrowing their original liquidity needs for stabilization. That has informed changes in the way they allocate assets.”