World’s Biggest Withdrawal From the World’s Biggest Fund
The Kingdom of Norway was once no more than a fisherman’s 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. It’s autonomous from the Norwegian economy. It’s 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. It’s an ethically assembled fund, and very much a “rainy 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 “historic event” by pointing out we’re “also in a crisis that lacks historical parallels. There’s been a double-whammy hitting the Norwegian economy; coronavirus lockdown and the oil-price collapse.” The fund also needs to rebalance its stocks and bonds after market carnage threw off a target ratio set out in government policy.
It’s historic and all with a world record asset sale, but it’s peanuts for the trillion-dollar fund over the long-term. There’s 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!
