An official Norwegian proposal to set up an independent council to monitor the country’s giant sovereign wealth fund has been rejected by the financial sector lobby.
In a statement on its consultation response to a report looking at risks and challenges facing the NOK13tn (€1.23tn) Government Pension Fund Global (GPFG), Finance Norway (Finans Norge) warned against new functions creating ambiguities about roles and responsibilities.
The report, called ’The fund in a changing world’, was presented last September by a commission led by Norwegian professor Ulf Sverdrup, with the experts having been tasked with considering “long-term perspectives” for the GPFG.
The 286-page report included recommendations for some radical changes to how the Nordic country’s SWF is managed, such as giving Norges Bank a more flexible, more general principles-based mandate.
Among its recommendations for further development of the GPFG’s management model, the committee said the Ministry of Finance should establish an independent council, which could be tasked with monitoring, investigating and assessing various aspects of the fund – including geopolitical issues, and recommending measures related to the handling of the fund’s risks.
Explaining why having such a council might help, the Sverdrup commission said that analyses and investigations, carried out in a skilled environment, could prepare the ground for difficult topics entering public debate, and so contribute to laying the foundations for any potential adjustments to the management of the SWF.
In its statement on Thursday, Finance Norway mentioned many aspects of the report and recommendations that it agreed with, but said it was important to have continued stability and predictability around the fund’s investment strategy.
“Stability, long-termism and predictability are central to a manager, and Finance Norway believes it is crucial that the impression is not created that the fund’s strategy is ‘constantly’ under assessment and will be subject to frequent changes,” the association said.
As an extension of this, the lobby group said, it had responded to the committee’s recommendation to establish an external and independent council.
“There is already a clear and well-functioning division of roles between Norges Bank and the Ministry of Finance when it comes to responsibility for the framework, investment strategy and the implementation of the administration, and Finance Norway believes it is important not to establish functions that could create ambiguities around this distribution of roles and responsibilities,” the industry association said.
“In Finance Norway’s view, a better approach would be to call on external expertise when you see needs for special investigations,” it said.
In its own response to the Sverdrup commission’s recommendation about an independent council, Norges Bank, which manages the GPFG, did not come out against the idea – but questioned how such a panel would differ from the channels of advice that already existed.
“Norges Bank contributes to the development of the fund’s overall investment strategy through its role as adviser to the Ministry,” wrote the governor of Norges Bank, Ida Wolden Bache, and Nicolai Tangen, chief executive officer of the bank’s subsidiary Norges Bank Investment Management (NBIM), which manages the fund, in a letter sent to the ministry on 5 January.
“Our experience from managing the fund and our proximity to the investment portfolio put us in a good position to provide the Ministry with strategic advice,” the pair said, going on to describe some aspects of how NBIM did this.
“As part of the work on developing the investment strategy, the Ministry has also commissioned external expert groups to examine specific issues,” the Norges Bank leaders said in the letter published on 6 January.
If such a council were set up, they said its role had to be clearly defined.
“It should also be made clear how such a council differs from the Ministry’s established processes for advice on the investment strategy,” Wolden Bache and Tangen said.
Meanwhile, despite incurring heavy investment losses last year, the GPFG reached record size in Norwegian kroner last week, hitting the milestone of NOK13tn for the first time on Thursday.