Yngve Slyngstad, CEO of Norges Bank Investment Management, has warned that the country’s sovereign wealth fund could lose the equivalent of the Norwegian state budget should the world face another year such as 2008, when most asset classes fell in tandem.
Norway’s sovereign wealth fund, the Government Pension Fund Global, is managed by NBIM, headed by Slyngstad. The fund has been branching out into property, to diversify away from core equity and fixed income holdings.
However, at a conference held at the Norwegian School of Economics in Bergen, Slyngstad warned that with the size of the fund approaching NOK5trn (€617bn) any repeat of events in 2008, which he characterised as being a once in a hundred years situation, could knock off some 30% of the value of the fund, or the equivalent of the annual state budget of Norway, some NOK1.5trn (€185bn).
According to E24.no, which reported on the conference, Slyngstad also sounded a warning over the future use of the fund. He noted that while Norway had been blessed by its natural resources, evidence suggested that few countries blessed this way become rich.
Other challenges identified by Slyngstad include returns from fixed income. Bloomberg reported comments by him suggesting returns from bond markets are set to remain low. This suggests the fund will be looking increasingly to property – or other assets if its mandate is adjusted to allow for this – given its existing 35% or so exposure to fixed income markets.