NORWAY - Changes to the investment rules of the Norwegian Government Pension Fund announced today will see the fund's equity exposure rise from 40% to 60%.

Pointing out that the first equity investments were made in 1998 finance minister Kristin Halvorsen said that the fund had "gained experience and shown that it can handle volatility in returns without it undermining the fund's investment strategy or fiscal policy". 

In expanding the equity portfolio the fund will specifically look at small listed companies to further diversify the exposure. Halvorsen also reiterated plans for the fund to invest in real estate and infrastructure.

The expansion of the equity portfolio will happen over the next few years "in order to minimise transaction costs".

In order to strengthen the NOK1.8trn (€221bn) petroleum fund's ethical investment approach the finance ministry will be given the power to exclude bonds issued by certain countries.

"This will primarily concern countries subject to UN sanctions or where there are other international initiatives Norway is supporting," the finance ministry said.

One of the first countries to be excluded will be Burma because of the measures taken against it by the EU and other countries, the ministry explained. Currently the fund is not investing in government bonds from Burma, a spokesman told IPE.

Another change to the regulations is that Norges Bank will be given free hand in choosing which countries and currencies to invest in as long as a satisfactory valuation, appropriate risk management and control procedures are in place. Until now the finance ministry issued a list with countries and currencies to invest in.

Pål Haugerud, deputy director general of the asset management department in the ministry of finance expects that this will lead to a broadening of the number of markets/currencies where the fund will be invested in.

In 2006 the Norwegian Government Pension Fund - Global posted a 7.9% return, outperforming the benchmark by 0.15 percentage points. This brings the annual average return since 1997 to 6.5% which means an average outperformance of 0.48 percentage points.

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