OECD commitment points to Norwegian fund opportunity
The latest review of the Norwegian economy by the OECD, and the government’s response, suggests funds could benefit from a shift away from taxes that benefit owner-occupiers of residential property.
Norway’s funds industry had a record 2013, helped by asset appreciation along with strong net inflows to reach record AUM.
However, as the OECD notes, the country ought to “seek to reduce distortions created by the tax system, notably those that offer advantages to owner-occupied housing.”
This has long been a thorn in the fund industry’s side, particularly in regards to retail business, where those buying primary or secondary residences, such as the ubiquitous summer country cottage, have benefited from tax incentives that outweigh the risk/reward profiles on offer from various collective investment strategies.
The Norwegian Ministry of Finance responded to the OECD by noting that “Some first steps were taken already in the budget for 2014, where we introduced growth enhancing tax cuts and redirected spending towards investments in infrastructure and knowledge.”
For providers of funds this may offer two advantages. Firstly, adjustments to the fiscal regime may put funds in a more positive light generally. Secondly, those strategies focused on infrastructure plays may benefit particularly from the additional investments set to be made by the government.
Meanwhile, the countercyclical buffer forced on local banks to ensure systemic stability means that there is less chance of asset management businesses owned by local banks being subject to corporate actions, such as being part of a distressed sale, which in turn should provide more confidence about the continued viability of such businesses.