This Country Has $1 Trillion to Invest. But It Won’t Be Easy
The Norwegian sovereign wealth fund officially hit a record value of $1 trillion early in the morning of September 19. It is the world’s largest sovereign wealth fund and has exceeded growth expectations, having already exceeded the milestone value it was expected to reach in 2018.
Norges Bank Investment Management, which manages the fund for the Norwegian government, attributed the milestone valuation to the weakening of the U.S. dollar and strong equity markets.
With such a high valuation, there are concerns that it will be difficult to find markets large enough to invest in. The fund already owns 1.3% of all global stocks. In addition, the temptation to use the fund to stimulate Norway’s economy could have a negative impact on the country. The Norwegian government made its first withdrawal from the fund in January 2016, 20 years after it was founded as a vehicle to invest the country’s oil revenue, and it is expected to withdraw 70 billion kroner ($11.3 billion) this year.
The fund is currently forecast to reach a valuation of $1.3 trillion by 2025, though the reliability of that estimate is in doubt given the fund’s demonstrated overperformance to date. The Norwegian government has cut expected returns from 4% to 3% and given the fund permission to raise its stock holdings from 60% to 70%, offset by a reduction in bond holdings.