Norges Bank proposes to increase the Oljefondets share up to 75 per cent.
the Share is now 60 per cent. The proposal involves, therefore, a major change in the management of oljepengene.
“A higher stake means that the expected return increases,” writes the central Bank of a letter which was sent to the Ministry of finance on Thursday.
Will take greater chances
Norges Bank will that its oil wealth will take greater risks and expose themselves to more risk in an uncertain future. It means that the fund’s value will fluctuate more than before. This must politicians be prepared.
the Win by living more dangerous is the expected profits will be higher. But it is not certain that it will go that way. Norges Bank recommends, however, that finance minister Siv Jensen takes the chance.
Expect to earn more
Norges Bank expects that the increase in the share portion shall increase the annual yield by around 35 billion. It is calculated after deductions for inflation and the rain with today’s fondsverdi on the 7300 billion.
But this is not certain. It can go both better and worse.
under current rules, up to 35 per cent of the fund’s money be placed in convertible securities and up to 5 per cent in real estate.
Increased stake to be matched by a declining share oljepenger in transferable securities (bonds).
the Rationale in the word
In a lecture on Thursday saying visentralbanksjef Egil Matsen that the properties of the transferable rentepapirene has changed over the last ten years.
in Short, has bonds been a better, but also more expensive insurance against fluctuations in the fund’s value. Both speak for a somewhat higher equity proportion, ” he says.
This elaborates on the he as follows:
- Expected return on bonds of high quality has fallen a lot.
- at the same time believe the bank that the expected excess return on stocks relative to bonds is slightly higher than the last share portion was assessed.
in other words: the Expected profits on bonds have fallen sharply. But it has not fallen as much on the shares.
Therefore: In the future there is more to earn extra to place oljepenger in the shares.
– It is difference between the expected return on stocks and bonds that are relevant for the composition of the fund’s benchmark index, says Matsen.
the Benchmark expresses the shares in shares, bonds and real estate.
the Rationale in the numbers
Matsen have put numbers on their expectations for the difference he is talking about.
- the Expectation is that the annual rate of return on bonds will be 0.25 percent for the next ten years, after inflation is deducted.
- Given the cautious assumptions and taking account of the uncertainty, Norges Bank assumed that the annual profits on the shares generally will be 3 percentage points better than bonds.
- Summing up: With 75 per cent shares are expected annual yield of the entire fund to 2.5 per cent in the next ten years, calculated after deduction for inflation. With the current stake of 60 per cent, the expected annual return is 2 percent.
difficult choice
Set on the tip is the choice of equity proportion in the fund about this:
- Higher equity proportion is attractive because it provides higher expected returns. But it is a deterrent because it means more risk and greater fluctuations in the return.
Given Oljefondets characteristics, fondseierens needs and attitudes and a variety of assumptions about the future concerns the balance between the attractive and forbidding.
Just an advice
A stake of 75 per cent Norges Bank’s advice to the Ministry of finance.
the Ministry should come up with its recommendation in the annual white paper on its oil wealth and the government pension fund norway. The coming of spring.
On the basis of the Storting’s notes will then the Ministry of finance determine the share portion its oil wealth to use in its management.
- Aftenposten met in august the man who has led the Oljefondets the assessment of the share portion:
He should select the most important numbers
- a Little later met the Aftenposten, a nobel laureate in economics who would not hang up in one spot for the share portion:
the nobel peace prize winner avfeier “Norway’s most important numbers”
Private investigation
the Ministry has received even a council this fall. The so-called Mark-the committee handed over its report to finance minister Siv Jensen in the middle of October.
the Committee had commissioned to assess the share portion of the fund. It was headed by senior economist and professor II Knut Anton Mork.
– the Choice of equity proportion is a balance between expected return and risk. Avveiingen must look to the father for the loss of fortune, the level of overall risk in the nasjonalformuen and the fund’s role in fiscal policy, said Mark, when the study was put forward.
With the exception of Mark, went selection to increase the share portion to 70 percent.
Norges Bank proposes thus to increase the proportion even more than the committee’s majority.
committee chairman Mark suggested that the share portion also being lowered to 50 percent.
Professor will cut more than 70 billion in Siv Jensen’s frame Selection: its oil wealth should buy more shares What has its oil wealth done for you? | Ola Storeng
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