Palico’s Post

PE fund managers will be rubbing their hands in anticipation today. Once again Norway’s behemoth of a sovereign wealth fund has requested permission to diversify into private markets. With $1.4trn to its name from the country’s vast oil reserves and as the largest single owner in the world's stock markets, it’s big news for the asset class. If only the Norwegian parliament finally gives Norges Bank Investment Management (NBIM) the green light… That’s not exactly guaranteed. According to the Financial Times, the sovereign fund has asked to invest in private equity at least three times already over nearly 20 years, only to be shot down. It’s also unlikely, if permission is granted, that NBIM will allocate 10% or more of its assets to private capital strategies from the outset. It’s believed that an allocation of 3%-5%, or $40bn-$70bn, is more likely as a starting point. Ida Wolden, Norway’s central bank governor, said today: “An increasingly larger share of global value creation takes place in the unlisted market. We believe that such an opening could give higher returns for the fund over time. We think it will be possible to invest in unlisted equities in a way that meets our expectations on transparency and responsibility,” as reported by Bloomberg.   According to data compiled by Nasdaq, companies raised no less than $4.5tn in private markets last year compared to $1.2tn in the public markets [https://lnkd.in/eNaDDuiy]. Investors are also flocking to alternative assets in search of diversification and higher potential returns. Private equity and private debt funds have experienced remarkable growth, their AUM surging from $1.7tn to $7.6tn and $300bn to $1.3tn, respectively, between 2010 and 2022. Private investments offer the opportunity for greater performance, lower volatility, and returns that are uncorrelated to public markets—and appear to be delivering on their promise. Hamilton Lane has found that private markets have withstood asset volatility better than stock markets, not only last year but from cycle to cycle. Their research shows that: “...as of Q3 2022, overall private markets demonstrated more resilience than public markets, outperforming public strategies across the board—in some cases by thousands of basis points.” [https://lnkd.in/eaaYFveq] This is the motivation for NBIM’s repeated requests over the years. Whichever way Norway’s parliament sways this time, investor relations teams will be watching the outcome with bated breath.  Read more on Norges Bank Investment Management’s PE aspirations: https://lnkd.in/g3ZWzUmp #privateequity #sovereignwealthfund #alternativeassets