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Impact Investing

IPE special report May 2018

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Norway welcomes investment proposals

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Norway’s market players have welcomed proposals to change regulations governing pensions fund investments as set out in a report by Caspar Holter, partner of Oslo-based consultants Pensjon & Finans.
Holter argues that the detailed investment rules governing Norway’s insurers – which manage around 75% of the country’s occupational pension funds – are more restrictive than regulations in the rest of Europe, and are holding back the development of proper pension fund provision.
“Firstly, the fact that regulation is the same for both insurance companies and pension trusts is wrong. Regulations are not as tight elsewhere in Europe. Rigid reserve requirements are forcing funds to sell high-risk assets in a distressed market, only adding to the volatility. Funds should be acting in harmony with the market cycle,” says Holter. “Secondly, there are too many quantitative investment regulations in Norway. Only 35% of assets can be invested in equities, for example, and only 5% in alternative assets. Also, only a certain amount of stock can be held in one company.”
Holter proposes a series of models that could be employed to absorb risk, if, as he suggests, the regulations are changed and Norway adopts a ‘prudent man principle’ more in line with the Netherlands and the UK.
Erik Garaas, managing director of GN Asset Management, the asset management arm of Gjensidige, one of Norway’s big five insurers, says it is an important contribution to the debate.
“Discussion about investment limits have been going on for 10–15 years. This analysis provides a new platform from which one can move the discussion forward. Holter has brought to the discussion a new argument and a new way of looking at the matter. It is a very important contribution.”
The report, Rammebetingelsene for kapitalforvaltning i norske livselskaper (the restrictive environment of Norwegian life assurers’ asset management), was sponsored by the Association of Financial Institutions in Norway, and is expected to be used by the law commission now tackling the financial regulations.

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