OSLO (Reuters) – Norway’s $ 1.3 trillion sovereign wealth fund is unlikely to generate the same high returns in the coming decades as it has seen in the past 25 years, said its chairman Nicolai Tangen.
Monday marked the 25th anniversary of the Norwegian government’s first injection of money to the central bank in order to build the world’s largest fund of its kind since then.
The fund was set up to pool the state’s income from Norwegian oil and gas production and to prevent the economy from overheating. In 1998 it was converted into a sovereign wealth fund.
Since then, the company has posted a net return of 4.42%, which is above its long-term goal of 4%, largely due to the strong returns over the past decade.
But that probably won’t go on, Tangen told Reuters.
“Now we have a record low in interest rates and the record markets on the stock markets. Given the record low interest rates, it is unlikely that they will fall any further, ”said Tangen, adding that the risk-return ratio is now different for both bonds and stocks.
“It is therefore extremely unlikely that we will repeat iterations in the past 25 years,” he added.
When it first became a sovereign wealth fund, it only invested in government bonds, later adding corporate bonds, stocks, and real estate. Last year the fund was allowed to participate directly in renewable projects.
Adaptation by Alexander Smith