The manager of Norway’s domestic sovereign wealth fund is being tasked with administering a new NOK50bn (€4.4bn) bond fund to help Norwegian companies access liquidity in the economic crisis precipitated by the COVID-19 outbreak.
Folketrydfondet, which manages the NOK269bn Government Pension Fund Norway (GPFN) – the smaller Nordic-investment portion of the country’s huge sovereign wealth fund – is to manage the new Government Bond Fund, the government announced on Sunday.
The development means Oslo-based Folketrydfondet will reprise one of the roles it played in the aftermath of the 2008 financial crisis, when it managed the Government Bond Fund which invested in Norwegian corporate between 2009 and 2014 when the fund was wound up.
Norwegian Prime Minister Erna Solberg said on Sunday: “The Norwegian economy is in a very demanding situation.
“The government will do what is needed and spend the money needed to secure the Norwegian economy and to assist the Norwegian business community, large and small,” she added.
Norway proposed two new loan measures with a total limit of NOK100bn, as a follow up to the first crisis package announced two days before.
One of the latest measures to be announced is a loan guarantee scheme aimed at new bank loans to small and medium-sized businesses, which will suffer losses as a result of the coronavirus outbreak, the government said, adding that the scheme would receive a guarantee framework of NOK50bn with more to be added if needed.
The restoration of the Government Bond Fund was announced as the second measure, with the proposed fund being managed by Folketrydfondet and having a limit of up to NOK50bn to be invested in bonds issued by Norwegian companies.
Kjetil Houg, Folketrydfondet’s chief executive officer, said: “We have the expertise and experience and will be able to make the first investments as soon as the law and mandate are established.”
Investments in the fund would be made on market terms and were a temporary tool for the bond market, the firm said.
“The measure will ensure deep pockets in a crisis situation, in the form of liquidity vis-à-vis companies that are natural borrowers in the bond market,” said Houg.
Yesterday morning Folketrydfondet said it was now waiting for Norway’s parliament, the Storting, to pass a law for the scheme, after which a mandate would be drawn up.