August 28, 2019 / 9:44 AM / 3 months ago

UPDATE 2-Norway wealth fund wants to better tap growth potential of unlisted firms

(Adds further detail in paragraph 7)

By Gwladys Fouche and Terje Solsvik

OSLO, Aug 28 (Reuters) - Norway’s $1 trillion sovereign wealth fund, the world’s largest, should have more freedom to invest in unlisted equities, its manager said on Wednesday, a proposal that could help the fund better capture the growth of U.S. tech firms.

The world’s largest sovereign wealth fund, which pools Norway’s revenues from oil and gas production in stocks, bonds and real estate abroad, is currently only allowed to invest in unlisted equities if a listing is imminent.

The fund’s management has complained in the past about being unable to invest in companies early on in their growth, particularly U.S. tech firms, as companies have tended to seek a listing late on in their growth process.

“The (central) Bank is of the opinion that the wording of the current regulation that the board must have expressed ‘an intention’ to seek a listing should be amended,” the central bank said in a letter to the finance ministry published on its website on Wednesday.

“To date, we have interpreted this mandate regulation as requiring a concrete board resolution to apply for listing in the near future.

“Our experience is that such resolutions are passed relatively late in the process, and that a number of transactions that might have been relevant to the fund have not therefore been pursued,” it said.

The letter suggested an alternative could be to allow the fund to be invested in unlisted shares in large companies that are not yet listed, and that a limit of 1 percent of the equity portfolio could be dedicated to them.

This would have corresponded to 63.5 billion crowns ($7.1 billion) at the end of the second quarter, according to a Reuters calculation.

The fund is invested in close to 9,200 companies worldwide, holding on average 1.4% of all the world’s listed shares.

It also held some $280 billion in fixed income globally at the end of the second quarter while in real estate, it is a co-owner of London’s Regent Street and of properties on the Champs-Elysees in Paris, among others.

Investing in unlisted equities has been a vexed issue for the fund. In 2014 it joined U.S. investors BlackRock and Waddell & Reed to buy a $1.6 billion stake in motor racing’s Formula One as an IPO was planned.

After the investment was made, Formula One cancelled plans for the IPO, putting the fund in contravention of its own mandate. The fund came under political and media criticism for the investment and the fund’s CEO acknowledged mistakes had been made. (Reporting by Gwladys Fouche, editing by Terje Solsvik and Jon Boyle)

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