NORWAY - The Norwegian petroleum fund will increase its equity allocation from 40% to 60%, according to its executive director Knut Kjaer.

Giving a presentation about long-term investing at ABP's European pension fund summit in Heerlen today, Kjaer said the Norwegian parliament has decided to increase the equity investment for the State-owned fund.

According to Kjaer, who this year celebrates his 10th year with the fund, a long-term investor, such as a pension fund, should be an "equity owner" rather than a "lender" in the market who invests in bonds.

"But there are some problems," said Kjaer.

"The public market equity governance structure is threatened by the trend of private equity and also by other trends. However, owners always find a way to protect their investments," he added.

Kjaer stressed the importance of rebalancing investments, stating all new assets the fund gains from oil will be invested in equities.

He pointed out in 1997 the fund invested 100% of assets in bonds but the fund has gradually adopted more risk over the years.

Despite the constant scrutiny by the Norwegian press and some politicians, the fund has has achieved an average return of 4.6% since December 31 1996.

"Long-term investing is about the willingness to accept volatility," he added.

The executive director recently announced his departure from the fund, but there were no further revelations as to what will do next after leaving the Petroleum fund.


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