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"We
probably face the greatest changes for 30 years," Nicolai Tangen
told a Norwegian parliamentary hearing, adding the world's
largest sovereign wealth fund expects "growing frictions between
superpowers and a reversal of globalisation".
Tangen said that the Norwegian fund, which invests all of its
assets in foreign stocks, bonds, property and renewable energy
projects, has "nowhere to hide" and must manage the risk that
comes with exposure to global markets.
"We have a rocky ride ahead," he said, adding that inflation,
already on the rise before the Ukraine conflict, has continued
to increase, while interest rates are still very low and share
prices remain high.
Of all the risk factors, stagflation was "the worst", Tangen
said, adding it could potentially lead to a 40% fall in the fund
and that it was a more likely scenario than six months ago.
"We have a combination of high price rises and lower-than-before
economic growth, inflation is going up and growth is on its way
down," Tangen later told Reuters.
"It looks like we are potentially nearer a scenario of
(stagflation) than we were earlier."
Founded in 1996, the fund invests revenue from Norway's oil and
gas sector and holds stakes in 9,300 companies globally, owning
1.3% of all listed stocks.
Assets now correspond to $230,000 for every Norwegian, and the
purpose of the fund is to share the proceeds of the country's
oil and gas revenues with future generations.
RUSSIA AND RENEWABLES
Norway ordered the fund to first freeze and then divest its
Russian assets, worth some 27 billion crowns ($2.85 billion) and
equivalent to 0.2% of its total value at the end of 2021, after
Moscow began its "special military operation" in Ukraine.
However, the fund has not yet begun selling, Tangen said, adding
that he did not know when this would be possible as the Moscow
market was not functioning well with traded volumes not large
enough for its needs.
It could not be sure who counterparties were, making it hard to
avoid selling to individuals under international sanctions.
Elsewhere, the fund took its first ever direct stake in a
renewable energy project, a Dutch wind farm, in April last year,
but has not done so since.
Tangen said even though the fund has a mandate from parliament
to invest up to 2% of its total value in renewables, it would
take some time as competition was fierce and "good prospects
(are) hard to find".
($1 = 9.4587 Norwegian crowns)
(Reporting by Gwladys Fouche; Editing by Terje Solsvik, Louise
Heavens and Alexander Smith)
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