Norway’s pension funds lobby has declared itself positive about a government plan to back investment in entrepreneurs and start-ups, but warned that certain current or potential regulatory burdens on its members could make such investment difficult.
The Norwegian government presented a white paper to the country’s parliament on Friday on entrepreneurs and start-ups, saying it aimed for Norway to be the best country in the world to start or run a business in.
In the 130-page report outlining its policy direction on this issue, it said state-owned investment company Investinor would be tasked with investigating how it could cooperate with pension funds and others to provide capital.
In response, Christer Drevsjø, chief executive officer of Norway’s Association of Pension Funds (Pensjonskasseforeningen), said in a statement on the white paper: “The Pension Fund Association is very positive that Investinor has been commissioned to assess how Investinor, in partnership with private owners such as pension funds and the like, can work together with the aim of improving access to capital in the Norwegian early-stage market.”
However, Drevsjø also set out the considerations and conditions for pension funds regarding such potential investments in entrepreneurs and start-ups, saying the pension funds only handled guaranteed pension products, which implied a need for “even and good returns, with an acceptable risk and cost profile”.
“Norwegian pension funds are subject to a special Norwegian capital requirement, which makes it more demanding to invest in unlisted businesses than is the case for European pension funds in general,” he said.
This affected behaviour, and could particularly affect investments in start-up businesses, he said.
Pension funds often had small management operations, he said, which meant the reporting and handling of investment and accounting had to be simple.
“These conditions normally favour fund investments,” the association’s CEO added.
Drevsjø said start-up businesses in a fund structure could be very attractive, and with good return prospects, but it was essential that the cost of ownership was not too great.
Referring to a previous dispute on how outsourced fund management costs are accounted for by pension funds, he said a possible requirement for the gross accounting of fund costs would “presumably make interest in investments minimal or non-existent”.
Investments involving risk exposure also needed good buffers, he noted.
“Most pension funds have large buffers, but this requires that there be no limit on how large a buffer an individual pension fund can have,” Drevsjø said.
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