NORWAY - The head of the NOK1.5trn (€180bn) Norwegian Government Pension Fund (Global) has cautioned against excessive investment risk, after proposals were made to increase the fund's equity allocation to 60% of the portfolio.
A council of independent experts appointed by the ministry of finance proposed increasing Global's equity allocation, but Knut Kjær, executive director, said:
"This is a demanding decision for the government authorities. The biggest mistake that can be made is to assume a level of investment risk that cannot be sustained in the face of market adversity. It is precisely in such a situation that the big losses may be incurred."
Global announced earlier it was considering a move into private equity and real estate following an investment strategy review.
Svein Gjedrem, governor of the fund’s manager Norges Bank, said the low return volatility strategy was used "perhaps to a larger extent than was reasonable" for a fund meant to be permanent.
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