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January 21, 2016 at 01:34 PM
(Bloomberg) — The world’s biggest wealth fund won’t be joining its counterparts in a selloff that’s hurting already depressed markets.
In fact, officials who supervise the $780 billion fund haven’t even discussed the possibility of shifting strategy, according to Egil Matsen, who this week started as the new deputy central bank governor in charge of oversight of the investor.
“There’s no indication that we need to sell assets now, not at all,” Matsen said in an interview in Oslo Thursday. “The governance structure around our sovereign wealth fund is actually designed to live through such periods.”
Across the Middle East, central Asia and Latin America, governments are tapping reserves accumulated when oil prices were high. Petrodollar-stocked state wealth funds are an influential force in global finance, accounting for 5 percent to 10 percent of assets. Their selloff is seen reaching $75 billion in equities and $110 billion in bonds, according to JPMorgan Chase Bank.
In Norway, the vast size of the wealth fund and a relatively limited government need for more cash to cover deficits means the investor is unlikely to need to burn through capital. Though the government this year plans to make its first withdrawal since the fund got its first capital infusion in 1996, the investor has said that dividends and interest income will be more than enough to cover those withdrawals.
‘Substantial’ cash
That means the fund can stick to plans to shift away from Europe and into emerging markets as it tries to tap into global growth.
“We’re in a different situation,” Matsen said. Cash flow from bonds and stocks, which are roughly 200 billion kroner ($22.5 billion), are “substantial” enough to allow the fund to plow forward with its existing plans, he said.
The fund has surged in size under a self-imposed straitjacket that caps government use of oil revenue. Its growth will allow the government to spend a record 209 billion kroner of its oil income this year.
