World’s Biggest Withdrawal From the World’s Biggest Fund
The Kingdom of Norway was once no more than a fishermanโs outcrop, but that all changed around sixty years ago when huge oil reserves were discovered within its ocean borders. The nation got minted, but it did something very prudent with its financial windfall, investing in a sovereign wealth fund full of stocks, bonds, and property.
The fund is a whale. It holds 1.4% of all global stocks and shares. Itโs autonomous from the Norwegian economy. Itโs worth around $185,000 USD per Norwegian citizen, so it’s a very happy country, and 73 countries have taken direct stakes in the fund racking up additional management fee revenues. Itโs an ethically assembled fund, and very much a โrainy day” fund for the future.
Now, that rainy day has arrived. The Finance Ministry of Norway published a budget yesterday that included a massive withdrawal from the fund, well over the $1 trillion usually generated from stock dividends and bond coupon payments.
Erica Dalsto, the chief strategist at Skandinaviska EB, justified the โhistoric eventโ by pointing out weโre โalso in a crisis that lacks historical parallels. Thereโs been a double-whammy hitting the Norwegian economy; coronavirus lockdown and the oil-price collapse.โ The fund also needs to rebalance its stocks and bonds after market carnage threw off a target ratio set out in government policy.
Itโs historic and all with a world record asset sale, but itโs peanuts for the trillion-dollar fund over the long-term. Thereโs no austerity in Norway thanks to its good governance and foresight to think ahead. This is the power of delayed gratification, people; we can all get invested and carve out our own rainy day fund!