Changes to the management of the Norwegian Petroleum Fund will lead to between Nkr30bn ($4.2bn) and Nkr50bn being placed in international equity markets as early as next year, according to Norges Bank.
The Petroleum Fund, which is managed by the bank according to guidelines set by the Finance Ministry, was set up by the government in 1990 to safeguard the country's economy once the oil and gas reserves run down by providing a source of restructuring investment. It is currently only allowed to invest in fixed income securities.
But the boom in the oil sector has surprised even the Norwegian Fi-nance Ministry. The latest figures from the ministry show that the fund will reach Nkr100bn by the end of this year and will top Nkr425bn by the end of 2001 - which is twice the amount of earlier predictions. With more money to play with, Norges Bank has recommended that the portfolio is broadened to include between 30% and 50% equities. The range of investments is expected to be wide as the bank is unwilling to invest heavily in the Scandinavian region. In a letter to the Ministry of Finance, it recommends reducing exposure in the smallest markets in favour of investments in the largest - primarily the US and Japan.
The proposal was included in the revised Norwegian 1997 budget in May and will be considered before the country's parliament rises for the summer at the end of June. Martin Skanke, deputy director general of the Petroleum fund at the Finance Ministry, believes the proposal will be successfully adopted with new regulations issued in the autumn. It is anticipated that the appointment of fund managers will then take place before 1 January 1998.
The management of the overall fund is the responsibility of Norges Bank" said Skanke, adding: "They have said they will use external managers for the equity portion of the portfolio,".
The selection process is one the bank is already used to. Last year it ap-pointed Goldman Sachs in the US and ABN Amro Asset Management in the UK to run part of its currency reserve portfolio.
Skanke said he expected the process to be similar, but that it was too early to name any one for the positions. "The selection of external mangers must be based solely on commercial grounds." he said.